Motilal Oswal Financial Services has maintained a positive outlook on the defence sector, stating that a fresh growth phase is on the anvil as focus would now shift toward the replenishment and upgrades. According to reports from Business Standard, the brokerage has reiterated a 'Buy' rating on Bharat Electronics Limited (BEL) with an unchanged target price of ₹510, based on the 45x two-year forward earnings. BEL currently trades at 42.4x/36.1x FY27E/FY28E EPS and the target price implies an upside of 20 per cent from the previous close of ₹419.85.
As reported by Business Standard, with a resolution of the West Asia crisis in sight, the focus would now shift toward replenishment of ammunition, missiles, and critical inventories, alongside the acquisition and upgrade of various platforms. The brokerage expects these orders, along with large platform orders, to start materialising during FY27. Focus would also be more on drones, anti-drones, electronic warfare, air defence control systems and active protection systems.
According to Business Standard, the Finance Commission acknowledged that there is a need to increase overall spending in the defence sector considering the recent geopolitical situations and hostility at Indian borders. The Commission recommended a much higher 30 per cent Y-o-Y increase in capex, which it believes will support the armed forces in achieving multi-domain operational capabilities. Motilal Oswal noted that domestic defence production rose 16 per cent Y-o-Y to ₹1.7 trillion in FY26, surpassing estimates, while defence exports jumped 63 per cent to ₹38,400 crore.
As reported by Business Standard, Motilal Oswal expects total defence production to reach ₹3 trillion by FY29-30 and total defence exports could double from FY25 levels, reaching ₹500 billion by FY29-30. The brokerage has also maintained 'Buy' ratings on Hindustan Aeronautics for a target price of ₹5,500, Astra Microwave Products for ₹1,580, and Zen Technologies for ₹1,400, while maintaining a 'Neutral' rating on Bharat Dynamics for a target of ₹1,150.
