HAL, BEL Top Picks Among Defence Stocks For Elara Capital’s Harshit Kapadia

Harshit Kapadia, vice president- industrials, consumer durables and electricals and renewables at Elara Capital, is bullish on defence stocks after the Defence Acquisition Council approved procurements worth Rs 1.45 lakh crore.

With the government ramping up capacity building for the armed forces, defence stocks are back in focus. Kapadia's top picks among defence stocks are Hindustan Aeronautics Ltd. and Bharat Electronics Ltd.

He remains positive on the HAL stock despite the public sector undertaking facing some supply issues.

“The order pipeline that they (HAL) are looking at is extremely good and they are working on an alternative supply of engines. So, they are resolving those issues. We will see some positive outcome from Hindustan Aeronautics by the end of this financial year,” Kapadia told NDTV Profit.

Earlier this week, the Cabinet Committee on Security approved the procurement of 240 aero-engines for IAF’s Su-30 MKI aircraft from HAL. The total procurement is valued at Rs 26,000 crore.

Kapadia is also bullish on BEL after the DAC’s approval for procurement proposals on Tuesday.

“Bharat Electronics is another stock that I would pick in the PSU space. The third would be Bharat Dynamics, but I think we will see improvement in the second half of this financial year for the company, so that is one stock I’ll be watching more keenly,” he said.

The Defence Acquisition Council on Tuesday gave its green signal to 10 capital acquisition proposals worth Rs 1.45 lakh crore to enhance defence preparedness.

Kapadia noted that private sector defence companies will be crucial in supplying components for these defence projects, especially in the shipbuilding and aircraft segments.

“Names like Data Patterns and Astra Microwave are our preferred companies within the space. Another company which recently added more products in the counter-drone system is Zen Technologies, which is looking very well-placed at the moment,” the senior analyst said.

The Elara analyst was positive about Bharat Forge Ltd. and Laresen & Toubro Ltd. among the largecap defence stocks. However, he was not too keen about shipbuilding companies. According to Kapadia, shipbuilding stocks are going through the middle of a bell curve.

“We see that in two years the growth momentum will be extremely good. There is a fear that because we have not seen a large shipbuilding order coming, the sustenance of growth of these companies is a bit of a question beyond FY28,” he said.

“I will not be that positive on shipbuilding companies, but if I still had to pick one, I would prefer Mazagon Dock within the entire space,” Kapadia added.