Four defence stocks that Motilal Oswal recommends to 'buy' for up to 35% upside

Shares of Bharat Electronics (BEL), Hindustan Electronics (HAL), Bharat Dynamics (BDL), Astro Microwave Products and Zen Technologies are in focus on Tuesday, December 30, after brokerage firm Motilal Oswal said it is largely positive on these defence stocks.

The analyst has "buy" ratings for the four stocks except Zen Tech, for which it has a "neutral" recommendation.

Motilal Oswal's note comes after the Defence Acquisition Council's meeting on Monday, where it approved proposals worth ₹79,000 crore

in the winter session, taking the approvals to ₹33 lakh crore, nearly double the capital outlay on defence of ₹1.8 lakh crore. 

The approvals span across a wide spectrum of capabilities, including munitions, missiles, air defence systems, surveillance and communication

equipment, training systems and naval support platforms, reflecting a balanced modernisation push across all three services, Motilal Oswal said.

While the acceptance of necessity (AoN) approvals do not immediately translate into order inflows, the breadth and scale of the approvals materially de-risk order inflows for key defence PSUs and select private players over the next two to four years, it added.

Key Beneficiaries

Motilal Oswal said the Defence Acquisition Council's approval of projects worth ₹79,000 crore is likely to benefit both, leading defence public sector undertakings (PSUs) and select private players.

Here's a look at the projections made by the brokerage:

Stock	Rating	Price Target	Upside
BEL	Buy	₹500	27%
HAL	Buy	₹5,800	32.6%
BDL	Buy	₹1,478	35.3%
Astra Micro	Buy	₹1,100	12.2%
Zen Tech	Neutral	₹1,400	0.4%

Motilal Oswal said BEL is well-positioned to capture orders for radar systems, drone detection, HF SDR communications equipment, GBMES, and electronics portion of other systems.

HAL could see orders tied to HALE RPAS, Astra Mk-II missile integration, and full missile simulator production/support for platforms like Tejas.

Bharat Dynamics is positioned to gain from guided rocket ammunition, missile system production and other munitions and missiles that fall under its manufacturing scope, while procurement of BP tugs and allied marine support vessels opens opportunities for shipyards such as Mazagon Dock Shipbuilders, Cochin Shipyard, Garden Reach Shipbuilders, it said.

Private players, including Astra Microwave, Zen Tech, L&T, Tata Advanced Systems, could see increased participation for components and in some cases, fully-integrated products such as full mission simulators and SPICE-1,000, it added. 

The five stocks ended the previous session mixed, with BEL declining 1.2% while Zen Tech ending with gains of 1.4%.

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