JPMorgan has initiated coverage on heavyweights in the Indian defence landscape, including Hindustan Aeronautics Ltd. with an 'overweight' rating and a target price of Rs 5,135.
The brokerage has also started coverage on Bharat Electronics Ltd. with an 'overweight' rating and a target price of Rs 340. Meanwhile, it has initiated a 'neutral' call on Mazagon Dock Shipbuilders Ltd. with a target price of Rs 4,248 apiece.
JPMorgan highlighted the Indian defence sector as a promising avenue for long-term structural growth, supported by increasing capital expenditure estimated at $150 billion over the next five years and a strong push for domestic manufacturing.
The brokerage emphasised that India's defence ecosystem is still in the early stages of expansion, with an estimated 46% compound annual growth rate in exports over the last seven years and a robust domestic production trajectory.
BEL stands out as JPMorgan's top pick due to its diversified portfolio spanning land, air, and naval defence segments, complemented by its strong financial track record.
With the government scaling up procurement policies and reducing reliance on imports, JPMorgan projects significant revenue growth for defence incumbents, forecasting a 12-15% sector-level compound annual growth rate over the next half-decade.
It also noted that recent stock price corrections offer attractive entry points for investors looking to ride the wave of structural growth in the industry.
The firm's optimistic outlook aligns with India's broader geopolitical strategy and rising global demand for indigenous defence exports, which are expected to reach Rs 500 billion by fiscal 2029, as per the note.
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