India aims to become self-reliant in defense manufacturing through the Make in India initiative. With a focus on indigenization and record defense budgets, Indian defense companies are poised for massive growth. Stocks like Hindustan Aeronautics, Bharat Dynamics and Bharat Electronics could deliver explosive returns in 2024.
Hindustan Aeronautics – Top Pick Targeting 45% Returns
Hindustan Aeronautics Limited (HAL) is the largest defense PSU involved in design, development, manufacture and upgrade of fighter aircraft, helicopters, transport aircraft, engines, avionics and components. HAL has an order book of over ₹81,700 crore as of May 2023.
With self-reliance in defense manufacturing gaining strategic importance, HAL is expected to rapidly expand manufacturing capabilities in the coming years. The company is ramping up Tejas production from 16 to 24 fighters per year. The share price has surged 145% in 2023 on the back massive order wins.
HAL has set an ambitious revenue target of ₹26,000 crore by 2024-25, a 20% YoY growth. ICICI Direct set a price target of ₹3,618 for 2024, 45% above the current levels of ₹3,020. HAL with its strong order pipeline, market leadership and indigenization drive offers the best stock to play the defense boom.
Bharat Dynamics – Targeting 30% Returns Backed by Strategic Orders
Bharat Dynamics Limited (BDL) is a manufacturer of ammunitions and missile systems such as surface-to-air missiles, anti-tank guided missiles, underwater weapons, countermeasures, launchers, torpedoes and decoys. BDL is the sole supplier of missiles to India’s armed forces with an over 90% market share.
With the government focused on building domestic manufacturing capabilities, BDL is expected to rapidly expand production over the next decade. BDL has an order book position of nearly ₹24,021 crore as of March 2023 which provides multi-year revenue visibility.
ICICI Securities set a price target of ₹2,038 for 2024, an upside of 30% over the current market price of ₹1,738. As India’s missile maker, BDL is a proxy for indigenization in defense. The company offers a strong investment case for 2024 driven by domestic orders and export potential.
Bharat Electronics – Surging Over 20% Backed by Radar & Communication Orders
Bharat Electronics Limited (BEL) is engaged in design, development and manufacturing advanced electronic systems used by the Indian Armed Forces. BEL manufactures radars, naval systems, electronic warfare suites, communication systems, tanks electronics, and weapon systems.
Over the next decade, the increasing deployment of radars, communication networks, electronic warfare and avionics systems will drive strong growth for BEL. As of December 2023, the company’s order book for the 2023-24 financial year (FY24) has reached Rs 18,298 crore. This includes orders worth Rs 60,690 crore in the fourth quarter of FY23 and Rs 14,384 crore in the financial year 2023-2024 so far.
BEL is targeting a 15% CAGR in revenues through 2025 on the back of strong order inflow and fast-tracking of deliveries. Anand Rathi set a price target of ₹221 for 2024, an upside of over 20% from current levels. Backed by strong fundamentals, BEL offers an attractive investment opportunity.
Outlook: Exponential Growth on Localization, Surging Defense Budgets
The Indian defense sector is entering an exponential growth phase driven by rising threats, record budgets and self-reliance push. The defense budget for 2023-24 stood at a mammoth ₹5.93 lakh crore, a 13% rise over 2022-23 budget estimates. Higher budgetary allocations will drive massive order wins.
Under the Made in India initiative, the government aims to achieve $25 billion in defense production and $5 billion in exports by 2025. This will create sustained growth opportunities for companies like HAL, BDL and BEL over the next decade. Leading brokerages are betting on further upside given the multi-year visibility in orders.
Defense indigenization and manufacturing expansion remain a national priority, given heightened border tensions and changing global order. Investors can ride the upcoming defense boom through stocks like HAL, BDL and BEL over 2024 for potentially massive returns.