The Ministry of Defence (MoD) approved several orders in the final week of FY23, benefiting PSUs like Bharat Electronics, Bharat Dynamics, Garden Reach Shipbuilders & Engineers, Cochin Shipyard, and Goa Shipyard.
As a result, shares of defense companies increased by more than 6% on Friday during intraday trading. Bharat Dynamics (BDL) was trading 3.22 percent higher at 985.90, while shares of Bharat Electronics (BEL) increased 6.42 percent to trade at 97.36 each on the BSE. Mazagon Dock Shipbuilders Ltd. shares rose 2.73 percent, and Garden Reach Shipbuilders & Engineers saw a 5.98% increase to 457.55.
The MoD on Thursday inked a number of equipment contracts with Indian shipyards Bharat Dynamics, Bharat Electronics, and BrahMos Aerospace totaling more than 35,000 crore.
According to domestic stockbroker ICICI Securities, the majority of these orders fall under the Indian-IDMM category, in keeping with the government’s emphasis on indigenization.
As a result, the brokerage anticipates beneficial effects for companies that produce radars, instruments, and surveillance systems, such BEL and Data Patterns.
According to the statement, the orders make up the long-awaited backlog for BDL, BEL, and Shipyards.
The brokerage prefers BEL as its top pick in the defence space and has maintained a ‘Buy’ tag with a target price of ₹125. The current awarding of orders by the MoD may benefit BEL the most, followed by BDL. In case of BEL, apart from the direct award of ₹11,830 crore worth of orders, additional opportunities from AWS, NGOPV and NGMV are also possible, it said.
Taking cognisance of better earnings outlook for BDL, the brokerage has revised its target price to ₹1,175 on DCF valuation from ₹955 earlier. The brokerage has also revised BDL’s recommendation to ‘Buy’ from ‘Add’ earlier.
The companies Cochin Shipyard, Goa Shipyard and Data Patterns are ‘Not rated’.
ICICI Securities’ defence stock picks –
- Bharat Electronics (BUY), Target Price: ₹125
- Bharat Dynamics (BUY), Target Price: ₹1,175
- GRSE (REDUCE), Target Price: ₹385
- MDSL (SELL), Target Price: ₹600
The views and recommendations made above are those of individual analysts or broking companies, and not of sharebaz.