HAL, BEL or Bharat Dynamics? Which defence stock has a greater potential upside?

Bharat Electronics

Phillip Capital has a “buy” rating on the Nifty 50 “Navratna” PSU with a price target of ₹390. This implies a potential upside of 41% from current levels and above its recent peak of ₹340.
The brokerage expects a major finalisation of orders worth up to ₹12,000 crore by the end of the month. A similar remark was made by brokerage firm JPMorgan in its note on Friday, March 7. In case it does win orders worth ₹12,000 crore by the end of the month, BEL would be able to meet its financial year 2025 order inflow guidance of ₹25,000 crore.It called BEL a market leader with an order backlog of ₹71,200 crore and strong revenue visibility.

Hindustan Aeronautics

Phillip Capital expects a potential upside of 60% for Hindustan Aeronautics (HAL) from current levels as its “buy” rating on the stock comes with a price target of ₹5,500. The brokerage expects GE 404 Engine deliveries to commence from either this or next month.
The stock with the highest upside among these names, Data Patterns shares may more than double in value, according to Phillip Capital. Its “buy” rating and ₹3,400 price target implies a potential upside of 112% from current levels.

The brokerage called Data Patterns a vertically integrated defence electronics player with a strong radar portfolio. A robust order pipeline prompts the brokerage to value the stock at 50 times financial year 2027 Earnings Per Share (EPS), in comparison to its current valuation of 22 times.

The best performer on the Nifty Midcap index this week, shares of Bharat Dynamics gained nearly 17% this week. Phillip Capital expects a potential upside of 23% on the stock with a price target of ₹1,400. It said that the supply chain issues of the company are resolved and it is on course to achieve its ₹3,000 crore revenue guidance for the year.

Solar Industries

Phillip Capital also has a “buy” rating on Solar Industries with a price target of ₹12,000, which implies a potential upside of 27%.

Defence stocks received a leg up this week after European countries have announced big allocations to their respective defence spending to shield themselves against potential Russian aggression as highlighted by most of their statements.

French President Emmanuel Macron told Le Figaro newspaper after a gathering of political leaders in London over the weekend that the EU should provide €200 billion ($210 billion) to boost its defence capabilities.

Indian defence exports surged to ₹21,000 crore in financial year 2024, which was a growth of 32.5% over the past year. India currently exports defence equipment to over 100 countries, with the top three destinations being the US, France and Armenia, according to a PIB release dated October 2024.

(With Inputs From Upasana Bhatt.)