BHEL, HAL, Siemens, BEML, Cummins, BEL: Top defence stocks to buy - Check price targets

India’s defence ecosystem is entering a structural, multi-year growth phase led by indigenisation, deep-tech innovation and rising export opportunities, according to PL Capital. It said defence companies are moving beyond contract manufacturing towards IP-led technology development, with research and development, software and system integration becoming key differentiators.

PL Capital said export ambitions are widening across the sector as Indian companies target global markets through technology partnerships, localisation, indigenisation, local manufacturing tie-ups and co-development models. According to PL Capital, drones and counter-drone systems have emerged as the biggest near-term opportunity. 

It said that 75 per cent of defence capital procurement is reserved for domestic sourcing, with the focus shifting from platform assembly to indigenous IP, advanced electronics, AI-enabled systems, semiconductors and mission-critical sub-components.

The domestic drone market is expected to reach $11.1 billion by 2030, while procurement could rise from Rs 2,000-3,000 crore in the previous cycle to about Rs 13,000 crore now and about Rs 30,000 crore in the next cycle. It said learnings from Operation Sindoor have accelerated procurement priorities and shortened the adoption cycle for indigenous drones, counter-drone systems and autonomous technologies.

PL Capital said electronics remains the brain of modern warfare, creating opportunities in C4ISR, software-defined radios, missile electronics and command-and-control systems. It added that directed-energy weapons, high-power lasers and autonomous platforms are emerging as new growth verticals.

PL said value creation is increasingly shifting towards software, AI algorithms, electronic warfare and command-and-control systems rather than pure manufacturing. Indigenisation, it said, is moving from complete platforms to high-value sub-systems such as semiconductors, processors, seekers, sensors and mission-critical electronics, expanding the opportunity for component suppliers.

Management teams, as cited by PL Capital, highlighted rising localisation, higher R&D spending and stronger collaboration with start-ups and academia. The report said companies are allocating larger budgets to AI, space, cybersecurity and other next-generation technologies, underlining a strategic shift towards technology leadership.

BEL alone is planning more than Rs 15,000 crore of R&D investment over the next five years. PL Capital also flagged long-duration opportunities in naval shipbuilding, commercial shipbuilding, maritime infrastructure, aerospace and space manufacturing, with India aiming to be among the top five in global shipbuilding and benefit from China+1 supply-chain diversification. 

PL Capital has a 'buy' rating Engineers India (Target Price: Rs 271), Hindustan Aeronautics (Target Price: 5,423), Kalpataru Projects International (Target Price: Rs 1,466), Kirloskar Pneumatic Company (Target Price: Rs 1,715) and Larsen & Toubro (Target Price: Rs 4,632).

It has an 'accumulate' rating on BEML (Target Price: Rs 1,940), Bharat Electronics (Target Price: Rs 453), Elgi Equipments (Target Price: Rs 637), GE Vernova T&D India (Target Price: Rs 4,650), Grindwell Norton (Target Price: Rs 2,002), Ingersoll Rand India (Target Price: Rs 4,934), KEC International (Target Price: Rs 558), Praj Industries (Target Price: Rs 389), Siemens Energy India (Target Price: Rs 3,274) and Voltamp Transformers (Target Price: Rs 10,503).

PL has a 'hold' tag for ABB India (Target Price: Rs 6,523), Apar Industries (Target Price: Rs 13,309), Harsha Engineers International (Target Price: Rs 461), Siemens (Target Price: Rs 3,750) and Triveni Turbine (Target Price: Rs 638). It has given a 'hold' call on BHEL (Target Price: Rs 321), Carborundum Universal (Target Price: Rs 986), Cummins India (Target Price: Rs 5,133), Hitach Energy (Target Price: Rs 30,768) and Thermax (Target Price: Rs 3,969).