HAL, Bharat Dynamics – Top Defense Stocks Recommended by Choice Broking for Consideration

Choice Broking analysts are optimistic about the defense sector’s growth in the next 5-6 years, anticipating increased spending on new platforms and the modernization of existing ones. They believe this will drive higher spending in the coming years.

In the upcoming quarter, the Indian defense market is expected to see continued growth, fueled by project executions such as LCA Mk1A, LCH, LUH, and HTT-40, as well as naval fleet enhancements, upgraded bombs and missiles, and platform modernization. Choice Broking underscores the positive outlook for defense manufacturing companies, attributing it to the Indian government’s emphasis on localization. The brokerage expects these companies to benefit from ongoing trends in platform acquisition and technological upgrades.

Choice Broking’s Top Picks in the Defense Sector:

Hindustan Aeronautics (HAL):

• Rating: Outperform
• Target Price: ₹2,427 per share
• The positive outlook for HAL is based on limited competition from the private sector, strategic diversification into the civilian sector, anticipation of new orders for LUH, LCH, Su 30, and HIT 40, and collaborations with foreign giants like Safran and Airbus. The company’s large order book is seen as a strong support for its growth story.

Bharat Dynamics:

• Rating: Outperform
• Target Price: ₹1,346 per share
• Choice Broking has a positive view on Bharat Dynamics, highlighting its role as a premier organization for the Indian government with over five decades of experience in defense equipment manufacturing. The company’s strategic position as the sole supplier domestically, a pipeline of upcoming big-ticket projects, and significant export opportunities contribute to its growth story. The sizable order book further reinforces its positive outlook.

Astra Microwave Products:

• Rating: Outperform
• Target Price: ₹651 per share
• Astra Microwave Products is viewed positively by the brokerage due to its longstanding role as a supplier of various equipment and systems, ongoing innovation in diverse products, and a healthy order book. The company’s positive attributes include a substantial addressable market, military modernization initiatives, and a diversified business model.

Choice Broking maintains an ‘Outperform’ rating for all three stocks, providing target prices based on their respective estimated earnings per share (EPS) for FY26. The targets are set at 22x, 32x, and 35x of FY26E EPS for HAL, Bharat Dynamics, and Astra Microwave Products, respectively. The brokerage increased the multiple for Astra Microwave Products, considering the expectation of new orders in the coming quarters, including radar for Tejas MK-1A and the Sukhoi 30MKI upgradation program.