Goldman Sachs assigns Buy rating on 5 defence stocks: Which ones and why?

Kolkata: The defence sector of India is throbbing with excitement. The sector is gradually shedding its dependence on budget allocation and government

orders. A recent Goldman Sachs report has said the aerospace and defense sector of the country is moving towards a deeper stake in the global supply chain. According to the brokerage note, private defense companies working in advanced materials, complex machining, electronics and artificial intelligence-based systems are in a strong position. Let’s have a look at the stocks the MNC broking firm has identified. These stocks are Solar Industries, Data Patterns, Astra Microwave, Azad Engineering, and PTC Industries for which Goldman Sachs has issued a ‘Buy’ rating.

Major drivers of growth in defence sector

The Goldman Sachs report identifies three long-term growth factors for the aerospace and defense sector. The first tailwind has come from the Union Budget. For the year FY27, the government has proposed 18% raise in capital procurement compared to FY26. This is expected to generate new orders for domestic companies.

The second factor which is expected to generate business for the Indian defence companies is the proposed European Union–India Free Trade Agreement. The third factor is the US–India trade deal, the contours of which are emerging now.

Goldman Sachs has said, all these agreements will provide Indian defense companies with an opportunity to expand their presence abroad. The report also states that global commercial aerospace demand remains strong. A significant indicator is that engine suppliers have order visibility until 2035, which is a positive sign for the long term.

Stock price, target price

Solar Industries: Rs 13,134.00
Target price: Rs 18,360

Data Patterns: Rs 2,728.80
Target price: Rs 3,640

Astra Microwave Products: Rs 924.60
Target price: Rs 1,455

PTC Industries: Rs 18,283
Target price: Rs 24,725

Azad Engineering: Rs 1,580

Opportunities and risks

However, Goldman Sachs has also listed some risks. These include changes in government capital allocation, delays in product development, and global companies sourcing from other countries. Furthermore, the transition from a build-to-print to a build-to-specification model may also take time.

Giving an example of how Indian defence companies are upgrading their capabilities, Goldman Sachs gave the example of PTC Industries. They said this company is “fast emerging as a credible processed materials supplier.” Processed materials and specialised alloys are considered critical inputs in aircraft engines and high-performance defence hardware.

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