Independence Day 2024: Top 5 defence stock picks as PM Modi stresses on domestic manufacturing, boosting exports

Defence stocks in India have been witnessing a stellar growth, driven by the government’s strong emphasis on boosting domestic defence manufacturing and achieving self-reliance in the sector. In his Independence Day speech, Prime Minister Narendra Modi reiterated the importance of making India ‘Atmanirbhar’ in defence production, in the path towards ‘Viksit Bharat 2047’ – the campaign that envisions a developed India by 2047, marking the centenary of its independence. 

PM Modi also highlighted the country’s transformation from being heavily reliant on defence imports to being one of the significant exporters of defence equipment, positioning India as an emerging global defence manufacturing hub.

India’s defence production recorded the highest ever growth in 2023-24 as the value of production reached ₹1,26,887 crore in FY24, registering a growth of 16.8% than the previous financial year.

In the Union Budget 2024, Finance Minister Nirmala Sitharaman allocated ₹6.21 lakh crore for the defence sector for FY25, which was 12.9% of the total Budget of the Government of India for the fiscal year.

The Budget 2024 sets aside a record capital outlay of ₹1.72 lakh crore for the Armed Forces. Allocation for aircraft and aero engines has seen a massive increase of 67% YoY while for other equipment it is down 12.8% YoY compared to revised estimates (RE) for FY24.

Considering the possible order funnel for FY25 and mapping it with the budgetary allocation, ICICI Securities believes defence stocks such as Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), Bharat Dynamics Ltd (BDL), Astra Microwave Products and Solar Industries are likely to benefit.

Further, the order pipeline for most companies remains healthy and their managements have guided for 15–25% revenue growth while maintaining the margins for FY25.

In its list of defence stock picks, ICICI Securities has a ‘Buy’ rating on Astra Microwave, Azad Engineering, Dynamatic Technologies, Solar Industries and Zen Technology. It has an ‘Add’ call on Hindustan Aeronautics, Bharat Electronics, Bharat Dynamics shares.

Here are top defence stocks to buy:

Solar Industries India | Buy | Target Price: ₹13,250

Solar Industries share price has rallied over 144% in one year since the last Independence Day. The multibagger PSU defence stock has jumped more than 477% in three years. Year-to-date (YTD) returns of the stock stands at 51%.

ICICI Securities expects the company to get the order for Pinaka defence systems in the next 3–6 months. It has a ‘Buy’ rating on Solar Industries shares with a target price of ₹13,250 apiece, implying an upside potential of 30.5% from Wednesday’s closing price.

Azad Engineering | Buy | Target Price: ₹2,450

Azad Engineering shares were listed on Indian stock exchanges on December 28, 2023, and has jumped more than 204% from its issue price. The defence stock made a decent stock market debut with a premium of 37.40% at ₹720 apiece on the National Stock Exchange (NSE).

Azad Engineering is a manufacturer of aerospace components and turbines and supplies its products to original equipment manufacturers (OEMs) in the aerospace, defense, energy and oil and gas industries.

ICICI Securities has a ‘Buy’ rating on Azad Engineering shares with a target price of ₹2,450 apiece, expecting an upside of more than 53% from its closing price on August 14.

Zen Technologies | Buy | Target Price: ₹2,000

Zen Technologies shares have doubled investors’ money since last Independence Day with over 100% returns. In the past three years, Zen Technologies share price has surged by a staggering 1,835%.

The brokerage firm has a ‘Buy’ call on Zen Technologies shares and expects 20% more upside. The target price for the stock is ₹2,000.

Astra Microwave Products | Buy | Target Price: ₹935

Astra Microwave shares have also given a multibagger return of more than 137% in one year since the last Independence Day. The stock is up nearly 400% in three months.

ICICI Securities has a ‘Buy’ rating on this smallcap defence stocks and a target price of ₹935 apiece.

Dynamatic Technologies | Buy | Target Price: ₹10,250

ICICI Securities has a ‘Buy’ rating and a target price of ₹10,250 per share for Dynamatic Technologies stock. The smallcap defence stock Dynamatic Technologies shares have risen 73% in the past 12 months and more than 215% in three years. The brokerage firm expects a whopping 51% upside for the stock.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.