The March quarter earnings season has sparked increased attention from investors in the defence sector, buoyed by the Indian government's focus on increasing domestic production of defence equipment. This strategic shift is creating a strong sense of optimism among investors about the prospects of defence stocks, which are expected to benefit from higher government spending, geopolitical tensions, an expanding range of locally produced defence products, growing export opportunities, and the adoption of advanced technologies such as artificial intelligence and robotics.
A new report by Nirmal Bang Institutional Equities provides an in-depth look at several listed defence stocks, forecasting positive outcomes for companies in this sector. Among these, the report highlights Solar Industries as one of the key winners, benefiting from the current market trends. Nirmal Bang also revises its price targets for several other major stocks in the sector, including Hindustan Aeronautics (HAL), Bharat Electronics (BEL), Bharat Dynamics (BDL), Mazagon Dock Shipbuilders, BEML, Data Patterns, Astra Microwave, and Paras Defence.
Here’s a breakdown of some of the key stocks and their expected performance:
Mazagon Dock Shipbuilders Mazagon Dock, a significant player in shipbuilding for the Indian Navy, is expected to report a pre-tax profit margin of 12–15% over the next three years. With a solid order book and positive progress on projects, the company is poised for growth. Its current trading PE ratio stands at 29.7 times. Nirmal Bang has raised its valuation to 26.5 times March 2027 earnings, with a target price of Rs 2,801, offering an upside of 15.2%.
Astra Microwave Products Astra Microwave, which specializes in microwave and communication technologies for the defence sector, is currently trading at a 1-year forward PE ratio of 28.5 times, close to its 5-year average. Nirmal Bang has assigned a Hold rating on the stock and valued it at 29 times March 2027 earnings, with a target price of Rs 738.
Bharat Dynamics (BDL) Bharat Dynamics, a leading manufacturer of missiles and launchers, is trading at a higher-than-average 1-year forward PE of 39.3 times, above its 5-year average of 25.8 times. Nirmal Bang has issued a Hold rating for the stock, valuing it at 28 times March 2027 earnings, with a target price of Rs 1,264.
Bharat Electronics (BEL) Bharat Electronics, a key player in the defence electronics and systems industry, is currently trading at a 1-year forward PE ratio of 40.8 times, significantly higher than its 5-year average of 20.7 times. Despite a 16% decline from its 52-week high, Nirmal Bang has assigned a Hold rating, valuing the stock at 35 times March 2027 earnings, with a target price of Rs 282.
BEML BEML, which manufactures defence vehicles and equipment, has seen its shares drop by 45% from their 52-week high. It is currently trading at a 1-year forward EV/EBITDA ratio of 19.2 times, below its 5-year average of 21 times. Nirmal Bang has valued it at 21 times March 2027 EBITDA, with a target price of Rs 4,100.
Data Patterns Data Patterns, a provider of advanced electronics and systems for defence applications, is trading at a 1-year forward PE ratio of 41.8 times, which is lower than its 3-year average of 52 times. Nirmal Bang has assigned a Buy rating, valuing the company at 50 times the estimated earnings for December 2026, with a target price of Rs 2,255.
Hindustan Aeronautics (HAL) Hindustan Aeronautics, which manufactures aircraft for the Indian Air Force and Navy, has seen a 28% drop in its stock price from its 52-week high. Despite this, HAL is trading at a 1-year forward PE of 28.4 times, well above its 5-year average of 14 times. Nirmal Bang has maintained a Buy rating, valuing the stock at 24 times March 2027 earnings, with a new target price of Rs 4,851, offering an 18.1% potential gain.
Paras Defence and Space Technologies Paras Defence, which specializes in defence and space technologies, has fallen 39% from its 52-week high. It is currently trading at a 1-year forward PE ratio of 55.6 times, lower than its 2-year average of 62 times. Nirmal Bang has assigned a Buy rating, valuing the stock at 62 times March 2027 earnings, with a target price of Rs 1,329.
Solar Industries Solar Industries, which focuses on manufacturing explosives and related products for the defence sector, is trading at a 1-year forward PE ratio of 57.6 times, higher than its 5-year average of 39 times. Nirmal Bang has initiated coverage on the stock, assigning a Buy rating. The company is valued at 46 times March 2027 earnings, with a target price of Rs 13,237.
Overall, the outlook for the defence sector appears positive, with several stocks in the sector poised for growth due to increased government spending on defence, domestic production initiatives, and the incorporation of new technologies. Investors are paying close attention to these companies as the government’s focus on defence continues to grow.
