India is undergoing a once-in-a-generation transformation from being one of the world’s largest defence importers to an emerging global defence manufacturing hub, according to Ashika Institutional Equities.
The government impetus on domestic manufacturing through Aatmanirbhar Bharat, higher defence budgets, indigenization policies, increased R&D spending, and greater private sector participation are creating a vertically integrated defence ecosystem.
Domestic companies are ‘moving up the value chain’ from component suppliers to technology developers and systems integrators while defence exports continue to accelerate, said the brokerage firm.
Ashika Institutional Equities has initiated its coverage on several defence stocks, including Hindustan Aeronautics (HAL), Bharat Electronics (BEL), BEML, Mazagon Dock Shipbuilders (MDL), Bharat Dynamics (BDL), Data Patterns (India), Astra Microwave Products, Paras Defence and Space Technologies, and Solar Industries.
It values these companies on forward P/E multiples, apart from BEML, for which it has adopt an SOTP framework using segment-specific EV/EBITDA multiples.
Here are the top defence stock picks by Ashika Equities:
Hindustan Aeronautics | Buy | Target Price: Rs 6,069
While HAL share price currently trades at 29x 1-year forward P/E, above its 5-year average of 21x and at par with its 3-year average of 29x, Ashika Equities said the premium is justified as it expects the delays in engine deliveries to be behind the company resulting in higher earnings growth between FY26-FY28E (14%) as compared to FY24-FY26 (9%).
It initiated coverage on HAL shares with a ‘Buy’ rating and value the company at 35x June-28E EPS, arriving at a target price of Rs 6,069.
Bharat Electronics | Buy | Target Price: Rs 506
Ashika Equities expects Bharat Electronics’s revenue, EBITDA and PAT to grow at a CAGR of 21%, 22% and 24%, respectively, over FY26-FY28E, driven by sustained order inflows, strong execution and operating leverage.
The brokerage firm initiated its coverage on BEL shares with a ‘Buy’ rating, valuing the company at 39x June-28E EPS to arrive at a target price of Rs 506.
BEML | Buy | Target Price: Rs 2,590
BEML stock price trades at 21x FY28E EV/EBITDA, below its 5-year average valuation of 27x and below its 3-year average of 34x, offering an attractive risk-reward profile.
Ashika Equities initiates its coverage on BEML shares with a ‘Buy’ call, valuing the defence business at 26x, Rail & Metro at 25x and Mining Equipment at 18x. It has BEML share price target of Rs 2,590 apiece, implying a ~35% upside.
Solar Industries India | Buy | Target Price: Rs 23,543
The brokerage firm initiated its coverage on Solar Industries with a ‘Buy’ rating, valuing the company at 60x June-28E EPS, in line with its five-year historical average, to arrive at a target price of Rs 23,543.
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Mazagon Dock Shipbuilders | Hold | Target Price: Rs 2,875
We expect Revenue, EBITDA and PAT to grow at a CAGR of approximately 10%, 13% and 10%, respectively, over FY26-FY29E. Although MDL currently trades at approximately 31x FY28E, above its three-year average of 22x and close to its 5-year average of 32x, we Mazagon Dock Shipbuilders commands an unparalleled strategic positioning, submarine leadership, extremely high entry barriers, long execution visibility, strong balance sheet and large optionality from P75I, Ashika Equities said, justifying the stock’s premium valuation.
It has a ‘Hold’ rating and Mazagon Dock share price target of Rs 2,875 apiece.
Paras Defence | Hold | Target Price: Rs 1,495
While Ashika Equities remains positive on Paras Defence’s long-term fundamentals and strategic positioning, it believes the current valuation adequately reflects the growth outlook.
The brokerage firm initiated its coverage with a ‘Hold’ rating and a target price of Rs 1,495 apiece.
Astra Microwave | Hold | Target Price: Rs 1,728
While Astra Microwave remains one of the strongest long-term beneficiaries of India’s defence electronics supercycle, the brokerage firm believes much of the medium-term growth is already reflected in the current valuation following the ~55% rally over the past 3 months.
It initiates coverage on the stock with a ‘Hold’ rating and values the company at 48x June-28E EPS, deriving a Target Price of Rs 1,728.
Bharat Dynamics | Hold | Target Price: Rs 1,360
Ashika Equities initiated its coverage on Bharat Dynamics shares with a ‘Hold’ rating, valuing the company at 50x June-28E EPS to derive a target price of Rs 1,360 apiece.
It assigned a lower target multiple of 50x June-28E EPS to reflect the uncertainty surrounding the pace and consistency of execution recovery in FY27 following the weak execution witnessed in FY26. It expects EBITDA margins to improve in FY27 as execution accelerates, leading to better operating leverage and a normalisation of employee costs as a percentage of revenue to around 16–18%.
Data Patterns | Hold | Target Price: Rs 4,893
While the company’s long-term structural growth story remains intact, Ashika Equities believes much of the near-term optimism is reflected in current valuations, limiting the scope for significant re-rating.
It has a ‘Hold’ rating on the stock and value the company at 55x June-28E EPS, arriving at a target price of Rs 4,893.
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