ICICI Securities in a latest noted said Hindustan Aeronautics Ltd (HAL) and Larsen & Toubro Ltd (L&T) are likely to be key beneficiaries of two orders worth Rs 21,100 crore approved by the Cabinet Committee of Security (CCS). The approval has been received for 12 Su-30MKIs at Rs 13,500 crore within 15 months of issuance of AoN, it noted adding that the order comes as a shot in the arm for HAL, currently saddled with execution issues pertaining to Tejas Mk-1A.
"Besides, we expect the order pertaining to upgrade of 84 Su30MKI soon. We also expect engine-related issues to be resolved up to a large extent by FY26E as GE has committed to deliver 24-26 engines per annum. Hence, we expect revenue growth of 20-25 per cent per annum for FY26/27E," it said.
ICICI Securities said other than HAL and L&T, the beneficiaries could be Bharat Electronics Ltd (BEL) for radar and EW systems and Dynamitic Industries, the only company to be collocated in Nashik at HAL’s factory for producing fuselage. Besides, Astra Microwave Ltd could gain from any trickle-down from BEL. PTC Industries for its engine components; and solar Industries for its ammunition-related raw material may also gain from the order, ICICI Securities said.
There has been a repeat order for 100 K-9 Vajra for Rs 7,600 crore, indicating the government’s focus on boosting artillery infrastructure, particularly 155mm guns, ICICI Securities said.
The indigenisation level for both the platforms is expected at over 60 per cent ICICI Securities said, thus creating opportunities for domestic defence ecosystem. We expect orders for Pinaka and P75 (3nos) in remaining FY25. "Besides, Su-30MKI upgrade order may get expedited, we believe," it said.
ICICI Securities said it has 'ADD' rating on HAL. Its key picks in defence space including Solar Industries Ltd (target price: Rs 13,250; Buy); Azad Engineering (target price: Rs 2,450; Buy) and PTC Industries (target price: Rs 20,070; buy).
"Going ahead, we believe the focus on augmenting the squadrons of Airforce might result in INR 630bn order for 84nos. Su-30MKI also getting expedited. Besides, we believe the ordering for Pinaka and P-75 may also be done in next 2-3 months as these have been pending for long," ICICI Securities said.