Shares of Hindustan Aeronautics Ltd (HAL) fell over 3% even though the company announced a new agreement with the Aeronautical Development Agency (ADA) to work together on the LCA AF Mk-2 program.
Investors are worried about the high prices of defense stocks like HAL. InCred compared HAL to Dassault Aviation, noting that while HAL had $3.67 billion in revenue and $921 million in profit last year, it is valued much higher at $41 billion compared to Dassault’s $6.7 billion.
Other defense stocks like Bharat Dynamics (BDL), Bharat Electronics (BEL), and Paras Defence also fell up to 5% due to profit booking and concerns ahead of the budget.
Nirmal Bang downgraded HAL from ‘buy’ to ‘sell’ due to high valuations, reducing its target price to ₹4,380 from ₹5,469. The brokerage warned that defense stocks might drop up to 20% after their recent strong performance, citing concerns about high valuations and risks like increased raw material costs and competition.
Despite this, Antique maintained a ‘buy’ rating on defense stocks, including HAL, BDL, BEL, and Bharat Earth Movers Limited. They highlighted positive government initiatives like developing defense corridors and promoting domestic production of defense items through increased foreign direct investment and incentives.
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