ICICI Securities in its latest monthly update on the defence pack said the sector witnessed an improvement in the ordering post the Lok Sabha elections. It noted that Hindustan Aeronautics (HAL) has received RFP for the procurement of 156 LCH Prachand helicopters and that the first Tejas Mk-1A aircraft is likely to be delivered this month.
Paras Defence and Space Technologies Ltd has started deliveries of avionic suites for the Saras Mk 2 to National Aerospace Laboratories while Solar industries Ltd has developed three new explosives, the domestic brokerage noted.
For the month, Garden Reach Shipbuilders & Engineers Ltd (GRSE) won orders worth Rs 1,910 crore, Bharat Electronics Ltd (BEL) Rs 3,170 crore, Cochin Shipyard Rs 1,100 crore and HAL Rs 1,170 crore.
"We continue to remain positive on the sector, as the order pipeline for most of the companies remains healthy and managements have guided for 15–25 per cent revenue growth while maintaining the margins for FY25," it said.
While ICICI Securities has no 'Buy' call from the defence PSUs, it is bullish on Solar Industries India Ltd (target price: Rs 13,250), Astra Microwave Products Ltd (target price: Rs 935) and Azad Engineering Ltd(Target price: Rs 1,750).
It also has a 'Buy'on Dynamatic Technologies (target price: Rs 10,250), but the brokerage awaits the award of the Pinaka order, which is in advanced stages.
ICICI Securities said it continues to like the business opportunities available for HAL, BEL and Bharat Dynamics (BDL). However, in case of BDL, execution remains at risk due to supply-chain constrains owing to geopolitical reasons. Within the defence PSU space, the brokerage has three 'Add' recommendations namely HAL, BEL and BDL. It has 'Sell' calls on GRSE and Mazagon Dock Shipbuilders Ltd; and no 'Buy' recommendation.
It awaits the orders for QRSAM and MRSAM, which are likely to benefit BEL, BDL and Astra Microwave.
"The order pipeline for many companies remained healthy and the managements have guided for 15–25 per cent revenue growth while maintaining the margins for FY25," it said.