HAL, PTC Industries, Bharat Electronics: Defence stocks may rally up to 55% post DAC nod

Antique Stock Broking continues to remain positive on select defence counters including Bharat Electronics Ltd, Mazagon Dock Shipbuilders Ltd, Hindustan Aeronautics Ltd, PTC Industries Ltd and others after the defence acquisition council (DAC) has approved proposals worth Rs 54,000 crore to enhance operational capabilities of the Indian Armed Forces.

For FY25 so far, DAC has accorded acceptance of necessity (AoN) to proposals worth roughly Rs 2.2 lakh crore under various categories of capital procurement, which promotes domestic manufacturing as per DAP-2020. The total share of domestic procurement has seen a phenomenal improvement from 54 per cent in FY19 to 75 per cent in recent years, said Antique.

DAC has approved proposals to enhance operational capabilities of the Indian Navy & Indian Air Force including procurement of AoN for 1350 HP engine to upgrade the present 1000 HP engine for T-30 tanks to enhance battlefield mobility, AoN for Varunastra torpedoes; AoN for airborne early warning & control (AEW&C) aircraft systems to alter spectrum of warfare, said the brokerage.

It said that approved guidelines for compressing timeline at various stages of capital acquisition, making the process faster, more effective, and efficient. It aims to reduce the average acquisition time from the earlier two years to six months so as to ensure that acquisition of the much needed platforms is not delayed and also avoid cost overruns as well as technology obsolescence.

"This provides a tremendous opportunity for Indian defence manufacturers With project approvals, we believe defence PSUs have strong growth opportunities in the near to long term," said Antique, whose target prices suggest up to 55 per cent upside potential in the preferred stock picks.

It has maintained a 'buy' rating on PTC Industries (Target Price: Rs 19,639), Bharat Electronics (Target Price: Rs 376), Hindustan Aeronautics (Target Price: Rs 4,887), Bharat Dynamics (Target Price: Rs 1,351), Mazagon Dock Shipbuilders (Target Price: Rs 2,632), Garden Reach Shipbuilders & Engineers (Target Price: Rs 1,783). However it has a 'hold' rating on Cochin Shipyard, with a target price of Rs 1,627.