HAL Vs BDL Vs Zen Tech Vs Data Patterns: 50-150% Gains In 1-Year; Which Defence Stocks To Look Out In Budget?

With the Budget just around the corner, brokerage Mehta Equities lists out four defence stocks that should be on the lookout on July 23, when FM Nirmala Sitharaman will announce the annual budget document for FY25. While defence PSU stocks like Hindustan Aeronautics (HAL) and Bharat Dynamics (BDL) who are often referred to as Modi stocks, are on the list, there are also private aerospace and defence companies in the top picks as well. The other two are Zen Technologies and Data Patterns.

In its note, Mehta Equities said, "As we analyse top defence stocks listed at Dalal Street - we get the same outperforming stocks coming up on the radar primarily on the backdrop of consistent demand, government backing, and long-term contracts."

Well, defence stocks have increased to over their historic all-time highs and most importantly, Mehta Equities has presented a secure investment choice on the backdrop of three factors. These are:

1. Defence Budget:

(FM Sitharaman allocated a staggering Rs 6.21 lakh crore for India's Ministry of Defence during the Interim Budget presentation in February. This marked a substantial portion of 13.04% of the Union Budget). Upward trend continues in Defence Capital Expenditure promoting 'Aatmanirbharta' (By 2030, the Indian defence budget is likely to grow to $200 billion).

2. Geopolitical Concerns:

War in Ukraine, an attack on Israel from Hamas, the Gaza-based terrorist group, tensions arising from China's military presence off the coast of Taiwan, and border tensions. (and internal conflicts call for renewed focus on the security and defence industry).

3. 'Make in India' initiative and Export Potential:

(Despite boasting the world's fifth-largest Defence budget), India sources a staggering 60% of its weapon systems from international markets. It's time for India to not only address its fiscal woes but also assert its security, sovereignty, and economic interests. (The good news is that the Indian government is trying to strengthen the nation's defence prowess by reducing dependence on imports.

The brokerage also added that large and sustainable opportunities for domestic players also exist particularly in engineering services and component sourcing, on the backdrop of the goal of reaching 50,000 crore in exports by 2029-2030). India shall be the leading global defence
manufacturing hub sooner rather than later.

Hence, the best plays as per Mehta Equities are HAL, BDL, Zen Tech and Data Patterns. Here are the performance and details of these stocks:

1. Hindustan Aeronautics (HAL):

HAL's share price is currently at Rs 4801.20 apiece on BSE with a market cap of Rs 3,21,092.25 crore. In the trading week that ended on July 19, HAL stock has nosedived by nearly 14% on BSE. YTD, the stock gained by 70%. In a year, the stock, however, emerged as a multi bagger with gains of 149.1%.

Incorporated in December 1940, HAL is one of the oldest and largest aerospace and defence manufacturers in the world. HAL began aircraft manufacturing as early as 1942 with licensed production of Harlow PC-5, Curtiss P-36 Hawk and Vultee A-31 Vengeance for the Indian Air Force.

Bharat Dynamics (BDL):

At present, BDL's share price is at Rs 1468 apiece on BSE with a market cap of Rs 53,811.38 crore. In the trading week that ended on July 19, BDL's share price also declined by 12% on the exchange. YTD, the stock advanced by over 70%. In a year, BDL shares have also jumped over 149%, becoming a multi-bagger just like its peers HAL.

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.

Zen Technologies:

By the end of the July 19 trade, Zen Tech's share price was at Rs 1381.20 apiece on BSE with a market cap of Rs 11,608.19 crore. Unlike the defence PSU stocks, Zen Tech's share price zoomed by 4% from July 15-19, while YTD, the stock gained by over 75%. In a year, Zen has climbed by 123%.

Incorporated in 1993, Zen Technologies Limited designs, develops and manufactures state-of-the-art Combat Training Solutions for the training of Defence & Security Forces worldwide and is a leader in providing Counter-Drone Solutions for safeguarding the borders, critical infrastructures etc. Zen Technologies is headquartered in Hyderabad, India with offices in India, UAE and USA.

Data Patterns:

Data Patterns share price also stood at Rs 3167.10 apiece, with a market cap of Rs 17,730.68 crore. However, Data Patterns share dipped by 8.2% on BSE. YTD, the stock surged by over 72%. In a year, the stock advanced by 54.11% on the exchange.

Data Patterns is a vertically integrated Defence and Aerospace electronics solutions provider catering to the indigenously developed defence products industry. Data Patterns' key strength is founded on over two decades of history of developing high-reliability products in this domain with the broad capability to develop and manufacture any high-reliability product.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.