BEL, BDL, HAL, SOIL, Data Patterns: 5 defence stocks to buy; target prices
Nuvama has 'Buy' rating on BEL, SOIL, BDL, HAL and Data Patterns. The brokerage has a target of Rs 520 on BEL, Rs 18,000 on SOIL, Rs 2,020 on BDL, Rs 5,800 on HAL and Rs 3,570 on Data Patterns.
- Jan 15, 2026,
- Updated Jan 15, 2026 8:58 AM IST
Nuvama in a note on defence sector said it prefer companies with strong execution capabilities, higher localisation and disciplined working capital management such as Bharat Electronics Ltd (BEL) and Solar Industries India Ltd (SOIL) over integrators such as Hindustan Aeronautics Ltd (HAL) and Bharat Dynamics Ltd (BDL) that typically face longer execution cycles. Subsystem players such as Data Patterns (India) Ltd remain attractive, given faster execution and superior margin profile, it said while suggesting BEL, Data Patterns and SOIL as its top defence stock picks.
"We believe the sector is entering a transition phase, eyeing execution and delivery across programmes. While incremental ordering should continue, the key monitorable is execution pace amid supply chain risks. Hence, recent valuation moderation offers selective entry opportunities," Nuvama said.
The preference it said is for defence electronics or subsystem players given superior execution visibility and cash conversion, supported by sustained capex, indigenisation momentum and export traction.
The domestic brokerage has 'Buy' rating on BEL, SOIL, BDL, HAL and Data Patterns. It has a target of Rs 520 on BEL, Rs 18,000 on SOIL, Rs 2,020 on BDL, Rs 5,800 on HAL and Rs 3,570 on Data Patterns. Nuvama has 'Hold' rating on Zen Technologies Ltd with a target price of Rs 1.400.
Nuvama said December quarter results may see the transition from order accumulation to delivery and execution quality, with select players (ex-HAL) better positioned to translate strong order book into sustainable earnings and valuation support. Overall, H2FY26E is likely to be materially stronger, as it is seasonally strong, driven by the need to meet government and internal targets, Nuvama said.
"BEL is our top pick for its robust execution/backlog and steady margins while SOIL and DPIL offer compelling multi-year growth potential," it said.
With Rs 9 lakh crore of AoNs approved in 36 months—defence backlogs are already at 3–5 times sales while FY26 budgeted capex of Rs 1.8 lakh crore (50 per cent-plus utilisation in H1) adds to order book visibility.
"However, stock dispersion is rising with focus shifting from ordering to timely delivery sans balance sheet and margin stress. We prefer defence electronics (to grow 2–3x defence budget) driven by modernisation and localisation drive," it said.
Nuvama said India's defence entered H2FY26 with strong order visibility, underpinned by Rs 10 lakh crore defence PSU pipeline.
It said backlogs are no longer a constraint, with most companies carrying 3-5 times annual revenues. The investment focus is therefore shifting from order visibility to execution credibility, specifically the ability to meet milestones without margin dilution/balance sheet stress.
"Execution risk has overtaken ordering risk, driven by recurring challenges around imported systems/sub-systems, complex integration and elongated certification/trial timelines. Against this backdrop, stock-level differentiation within the sector has become more pronounced, in our view," Nuvama said.
"Companies with superior execution, higher localisation and stable working capital profiles are better positioned to sustain valuation premiums (BEL, SOIL). In contrast, integrators such as HNAL and BDL (earnings estimate are likely to be downgraded) typically face longer gestation cycles and back-ended revenue recognition, while electronics/subsystem players such as BEL and DPIL benefit from shorter execution cycles, lower import dependence and faster cash conversion, resulting in structurally better earnings visibility and return profile," it said.
Nuvama in a note on defence sector said it prefer companies with strong execution capabilities, higher localisation and disciplined working capital management such as Bharat Electronics Ltd (BEL) and Solar Industries India Ltd (SOIL) over integrators such as Hindustan Aeronautics Ltd (HAL) and Bharat Dynamics Ltd (BDL) that typically face longer execution cycles. Subsystem players such as Data Patterns (India) Ltd remain attractive, given faster execution and superior margin profile, it said while suggesting BEL, Data Patterns and SOIL as its top defence stock picks.
"We believe the sector is entering a transition phase, eyeing execution and delivery across programmes. While incremental ordering should continue, the key monitorable is execution pace amid supply chain risks. Hence, recent valuation moderation offers selective entry opportunities," Nuvama said.
The preference it said is for defence electronics or subsystem players given superior execution visibility and cash conversion, supported by sustained capex, indigenisation momentum and export traction.
The domestic brokerage has 'Buy' rating on BEL, SOIL, BDL, HAL and Data Patterns. It has a target of Rs 520 on BEL, Rs 18,000 on SOIL, Rs 2,020 on BDL, Rs 5,800 on HAL and Rs 3,570 on Data Patterns. Nuvama has 'Hold' rating on Zen Technologies Ltd with a target price of Rs 1.400.
Nuvama said December quarter results may see the transition from order accumulation to delivery and execution quality, with select players (ex-HAL) better positioned to translate strong order book into sustainable earnings and valuation support. Overall, H2FY26E is likely to be materially stronger, as it is seasonally strong, driven by the need to meet government and internal targets, Nuvama said.
"BEL is our top pick for its robust execution/backlog and steady margins while SOIL and DPIL offer compelling multi-year growth potential," it said.
With Rs 9 lakh crore of AoNs approved in 36 months—defence backlogs are already at 3–5 times sales while FY26 budgeted capex of Rs 1.8 lakh crore (50 per cent-plus utilisation in H1) adds to order book visibility.
"However, stock dispersion is rising with focus shifting from ordering to timely delivery sans balance sheet and margin stress. We prefer defence electronics (to grow 2–3x defence budget) driven by modernisation and localisation drive," it said.
Nuvama said India's defence entered H2FY26 with strong order visibility, underpinned by Rs 10 lakh crore defence PSU pipeline.
It said backlogs are no longer a constraint, with most companies carrying 3-5 times annual revenues. The investment focus is therefore shifting from order visibility to execution credibility, specifically the ability to meet milestones without margin dilution/balance sheet stress.
"Execution risk has overtaken ordering risk, driven by recurring challenges around imported systems/sub-systems, complex integration and elongated certification/trial timelines. Against this backdrop, stock-level differentiation within the sector has become more pronounced, in our view," Nuvama said.
"Companies with superior execution, higher localisation and stable working capital profiles are better positioned to sustain valuation premiums (BEL, SOIL). In contrast, integrators such as HNAL and BDL (earnings estimate are likely to be downgraded) typically face longer gestation cycles and back-ended revenue recognition, while electronics/subsystem players such as BEL and DPIL benefit from shorter execution cycles, lower import dependence and faster cash conversion, resulting in structurally better earnings visibility and return profile," it said.