

Two defence PSUs accounted for nearly half of Indian defence production in FY25. While one manufactures fighter aircraft, helicopters and avionics and accounts for 27 per cent of Indian defence production; the other offers radars, communication systems and electronic warfare and accounts for 21 per cent of India's total defence manufacturing. As India grows on defence indigenisation, the two companies emerge as the best-positioned defence names, InCred Equities said as it initiated coverage on the two stocks with 'Add' ratings.
They are Hindustan Aeronautics (HAL) and Bharat Electronics (BEL).
InCred Equities noted that the Ministry of defence’s budget has roughly doubled, from Rs 2.7 lakh crore in 2015–16 to Rs 6.8 lakh rcore in 2025–26. The government's ‘Make in India’ initiative and policies like the Defence Acquisition Procedure 2020 prioritise domestic procurement, with approximately 75 per cent of the modernisation budget allocated to local industries.
"This focus has positioned DPSUs as the backbone of India's defence manufacturing ecosystem, producing everything from aircraft and electronics to naval vessels and weaponry," InCred said.
While initiating coverage on HAL, InCred said the stock's valuations may remain at a premium, given HAL's strong order book, coupled with ongoing indigenization and modernization initiatives that underpins a stable growth trajectory.
HAL is the maker of indigenous Light Combat Aircraft Tejas and Advanced Light Helicopter Dhruv
"EPS is forecast to rise by 16 per cent YoY in FY26F and 18 per cent YoY in FY27F. We initiate coverage on the stock with a target price of Rs 6,325, based on a 40× P/E on Mar FY27F estimates. Downside risks: Dependency on foreign engine suppliers poses execution risk while slippage in flagship programs or failure to scale exports could defer growth," InCred said on HAL.
In the case of BEL, InCred talked about its robust order book, coupled with expected orders’ long-term visibility, which provides strong revenue and growth confidence.
"The success of Operation Sindoor enhances its global standing and export potential. Supported by the government’s push for indigenization, and a trusted partnership with MoD, BEL is well-positioned as a key beneficiary in the defence sector," it said.
InCred Equities initiated coverage on the stock with a target price of Rs 459, based on a 44 times P/E applied to forecasted FY27F EPS of Rs10.4, which is +2SD of the last three years’ mean forward P/E.