BEL Vs HAL Vs BDL Vs Mazagon Docks: RoE Up To 40%; Which Defence PSU Stocks To Buy For Strong Gains?

Defence stocks: PSU giants like Bharat Electronics (BEL), Hindustan Aeronautics (HAL), Cochin Shipyard, Mazagon Dock Shipbuilders, and Bharat Dynamics (BDL) are some of the leading defence companies in India. According to experts, these defence biggies are expected to benefit from DAC's approval of Rs 540 billion proposals to enhance the operational capabilities of the Indian Armed Forces.

DAC's Rs 540 Billion Approval:

As per the latest update, the DAC nodded to the plan for a Rs 540 billion project to enhance the operational capabilities of the Indian Navy and Indian Air Force.

The procurement included --- a) AoN for 1350 HP engine to upgrade the present 1000 HP engine for T-30 tanks to enhance battlefield mobility, especially in high-altitude areas; b) AoN for Varunastra torpedoes, indigenously developed by the Naval Science & Technological Laboratory for the Indian Navy; c) AoN for Airborne Early Warning & Control (AEW&C) aircraft systems to alter spectrum of warfare and thereby increasing the combat potential of every other weapon system, pointed out by Antique Stock Broking.

Further, the DAC approved guidelines for compressing the timeline at various stages of capital acquisition. Antique's note pointed out that this will make the process faster, more effective, and efficient. It aims to reduce the average acquisition time from the earlier two years to six months so as to ensure that acquisition of the much-needed platforms is not delayed and also avoid cost overruns and technology obsolescence.

Which Defence Stocks Are Attractive?

According to Antique, the total share of domestic procurement has seen a phenomenal improvement from 54% in FY19 to 75% in recent years and is expected to improve further. This provides a tremendous opportunity for Indian defence manufacturers like PTC Industries, Mazagon, HNAL, BEL, BDL, and other defence players.

Hence, Antique's note said, "With project approvals worth INR 2.2 trn in YTDFY25, we believe defence PSUs have strong growth opportunities in the near to long term. Hence, we maintain BUY rating on these companies with a target price of INR 19,639 (DCF based) for PTC Industries, INR 376 (40x FY27E EPS) for BEL, INR 1,351 (40x FY27E EPS) for BDL, INR 4,887 (40x FY27E EPS) for HNAL, INR 2,757 (28x FY27E EPS) for MAZDOCKS & INR 1,783 (30x FY27E EPS) for GRSE."

1. BEL: BUY For Rs 376 Target Price

BEL's share price traded at Rs 301.65 apiece, up by 2% on BSE, with a market cap of Rs 2,20,499.48 crore. The stock is near its day's high of Rs 301.85. BEL shares' 52-week high and low are at Rs 340.35 and Rs 192.85 apiece respectively.

Its price-to-equity ratio is at 28.55x.

Bharat Electronics Limited (BEL) is a Navratna PSU under the Ministry of Defence, Government of India. It manufactures state-of-the-art electronic products and systems for the Army, Navy and the Air Force.

2. HAL: BUY For Rs 4,887 Target

Hal is the largest defence player in India with a market cap of more than Rs 2.7 lakh crore. It's currently trading at Rs 4047.90 apiece, up by 4.09% on BSE, trading near its day's high of Rs 4075.00 apiece.

The stock's 52-week high and low is at Rs 5,675 apiece and Rs 3,045.95 apiece respectively. Its return on equity is at 27.8% as of March 24.

HAL plays a crucial role in India's defence capabilities, focusing on self-reliance in military aviation. The company's developments, like the Light Combat Aircraft (LCA) namely Tejas and the Light Utility Helicopter (LUH), are central to modernizing the Indian Armed Forces. HAL's commitment to innovation and quality has positioned it as a significant player in the global aerospace industry.

3. BDL: BUY For Rs 1,351 Target

BDL share price trading at Rs 1329.85 apiece, up by 2.85%, with a market cap of Rs 48,747.31 crore. The stock's 52-week high and low is at Rs 1,794.70 apiece and Rs 836.95 apiece. Its return on equity is at 15.16%.

Headquartered in Hyderabad, Bharat Dynamics Limited (BDL), was incorporated on 16 July 1970 as a Public Sector Undertaking under the Ministry of Defence, Government of India to be the manufacturing base for guided missile systems and allied equipment for the Indian Armed Forces.

4. PTC Industries: BUY For Rs 19,639 Target

In the early trade of Monday, PTC Industries stock touched its 5% upper circuit to Rs 13,828.10 apiece with market cap of Rs 18,501.13 crore. The stock's 52-week high and low is at Rs 17,978.00 apiece and Rs 7,025.05 apiece respectively. Its return on equity, however, is low at 1.87%.

PTC Industries Limited has been manufacturing high-quality engineering components for various critical and super-critical applications for more than 56 years. PTC exports over 75% of its products to various countries across the world to renowned customers like Rolls Royce, Siemens, GE, Alstom, Metso, and Emerson, amongst others.

5. Mazagon Dock Shipbuilders: BUY For Rs 2,757 Target

Also, trading on a bullish note, Mazagon Dock's share price was at Rs 2647.45 apiece, up by 2.2% on BSE, with a market cap of Rs 1,06,330.97 crore. The stock's 52-week high and low is at Rs 2,929.98 apiece and Rs 920.48 apiece respectively. Its return on equity is strong at 40.5% on BSE.

Mazagon Dock's current portfolio of designs spans a wide range of products for both domestic and overseas clients. Since 1960, MDL has built a total 805 vessels including 30 warships, from advanced destroyers to missile boats and 8 submarines. MDL has also delivered cargo ships, passenger ships, supply vessels, multipurpose support vessels, water tankers, tugs, dredgers, fishing trawlers, barges & border outposts for various customers in India as well as abroad. MDL has also fabricated and delivered jackets, main decks of wellhead platforms, process platforms, jack-up rigs etc.

6. Garden Reach and Shipbuilders (GRSE): Buy For Rs 1,783

GRSE stock traded at Rs 1708.50 apiece, up by 0.4% on BSE, with market cap of Rs 19,571.21 crore. The stock's 52-week high and low is at Rs 2,834.60 apiece and Rs 758.60 apiece. Its current return on equity is at 21.43%.

In addition to ship building, GRSE as a diversified organisation, is also engaged in engine overhaul, assembly & testing and other engineering activities. The engineering division manufactures deck machinery items, pre-fabricated portable steel bridges and marine pumps.