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Defense stocks extend rally; BDL, CSL, GRSE, BEL zoom over 25% in 1 week

Bharat Dynamics hit a new high of Rs 1,650, zooming 17% in intra-day trade after the stock of state-owned defense company turned ex-date for 1:2 split on Friday.

Sensex, Nifty, stock brokers

SI Reporter Mumbai

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Shares of defense and related companies continued their dream run on the NSE and the BSE with Bharat Dynamics (BDL), Hindustan Aeronautics (HAL), Bharat Electronics (BEL), Paras Defence and Space Technologies, Cochin Shipyard (CSL), Mazagon Dock Shipbuilders and Garden Reach Shipbuilders & Engineers (GRSE) rallying up to 17 per cent in Friday's intra-day trade owing to strong growth outlook. Except, Paras Defence, the remaining stocks were trading at their respective record highs on the bourses.

In the past one week, CSL (44 per cent), BDL (42 per cent), GRSE (39 per cent) and BEL (27 per cent) have soared more than 25 per cent each. The remaining three stocks gained between 18 per cent and 19 per cent. In comparison, the S&P BSE Sensex was up 2.5 per cent during the period.

Among individual stocks, BDL hit a new high of Rs 1,650, zooming 17 per cent in intra-day trade. The stock of state-owned defense company turned ex-date for 1:2 split i.e. sub-division of existing 1 equity share of face value of Rs 10 into 2 equity shares of face value of Rs 5. In the past nine trading days, the stock has skyrocketed 80 per cent from Rs 915.83 (adjusted to split) on May 13.

On its rationale behind the stock split, BDL said, it was to comply with Department of Investment and Public Asset Management (DIPAM) Guidelines on Capital Restructuring; to encourage wider participation of small investors; and to enhance liquidity of the equity shares of the company in the stock market.

Meanwhile, BDL is scheduled to announce its March quarter (Q4FY24) earnings on May 30, 2024.

Shares of HAL too hit a new high of Rs 5,377.40, rallied 9 per cent in intra-day trade today. In the past seven trading days, the stock surged 29 per cent after the company posted a solid 52 per cent year-on-year (YoY) jump in its consolidated net profit at Rs 4,308.68 crore for Q4FY24. On sequential basis, net profit more-than-doubled from Rs 1,261.51 crore in December 2023 quarter (Q3FY24). In the past two months, it zoomed 70 per cent.

HAL, one of the largest Defence PSU in India, is engaged in design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aeroengines, avionics, accessories and aerospace structures.

The stock surpassed the foreign brokerage UBS's price target of Rs 5,200. Analysts believe this is justified by HAL's better order book scale up, lower competition and greater optionality in exports.

Analysts at UBS forecast a threefold increase in HAL's order book and 25 per cent revenue growth in the manufacturing topline (50 per cent of revenue) in FY23-27E. This would be led by a pick-up in large military orders due to a depleting fleet, a robust supply chain and ready capacity.

Shares of BEL hit a new high of Rs 299.95, up 4 per cent in intra-day trades. The stock of a leading aerospace and defence electronics company has zoomed 33 per cent in the past nine trading days.

BEL primarily manufactures advanced electronics products, multi-product, multi-technology - diverse product range including radar, missile systems, electronic warfare & avionics, anti-submarine warfare, electro-optics, homeland security, civilian products, etc.

BEL is favourably positioned to capture the larger pie of huge opportunity in Indian defence & space electronics systems/sub-systems or components industry which is expected to clock 13-14 per cent CAGR over FY22-27 with the share of defence electronics (in total defence production) increasing to 30-35 per cent in the coming years (vs. current share of ~25 per cent), according to analysts at ICICI Securities.

BEL is expected to be the key beneficiary in this impending opportunity in indigenisation of defence platforms considering its strong technical expertise and capabilities in designing, developing and manufacturing a wide range of strategic electronic products/systems, the brokerage firm said with a 'Buy' rating and target price of Rs 330 per share.

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First Published: May 24 2024 | 2:36 PM IST

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