HAL, Mazagon, BEL, Unimech, GRSE, Cochin Shipyard: Top defence stocks to buy; targets & Q previews
Choice Institutional Equities said execution is expected to take centre stage for Indian defence and aerospace companies in Q2FY27.
- Oct 9, 2026,
- Updated Oct 9, 2026 12:26 PM IST
Choice Institutional Equities said execution is expected to take centre stage for Indian defence and aerospace companies in Q2FY27, marking the start of an execution-led phase after a seasonally soft Q1. The brokerage said production and deliveries should improve sequentially across missiles, defence electronics, aerospace and shipbuilding, although quarterly numbers may remain uneven because of milestone-based revenue recognition.
According to Choice Institutional Equities, elevated order books mean the market is likely to focus less on fresh order additions and more on production ramp-ups and delivery schedules. The report said this could lead to wider earnings differentiation in H2FY27, with companies that have visible execution and diversified programme exposure likely to stand out.
Pipeline remains strong Choice said the medium-term pipeline remains robust, with QRSAM, P-75(I), Next Generation Corvettes, additional Scorpene submarines, Next Generation Missile Vessels, NGOPVs and other missile and air-defence programmes moving towards contract awards and execution.
It added that recent DAC approvals worth about Rs 1.1 lakh crore, along with an earlier package of about Rs 52,000 crore, underline opportunities across air defence, counter-drone systems, missiles, naval platforms, electronic warfare and unmanned systems. Choice said FY27 to FY30 could offer a strong multi-year manufacturing opportunity if these approvals convert into contracts and then into domestic production.
Exports emerge as second growth engine Choice Institutional Equities said exports are becoming an important second growth driver for Indian defence manufacturing. Defence exports touched a record Rs 38,424 crore in FY26, up 62.7 per cent year-on-year, with Indian products reaching more than 80 countries.
The report said the export mix is shifting towards higher-value indigenous weapon systems, with BrahMos and Akash gaining traction overseas. It noted that BrahMos' order from the Philippines, along with potential opportunities in Indonesia and Vietnam, could take its export pipeline beyond $600 million, while Akash has expanded beyond Armenia to Tajikistan and Turkmenistan.
Earnings outlook and risks Choice said Q2 should mark the transition from the strong order-book build-up of the past 12 to 24 months to a more visible H2FY27 earnings cycle. It said platform-heavy businesses remain exposed to delivery and milestone phasing, while defence electronics and specialised engineering firms may have better visibility because of shorter production cycles and multi-platform exposure.
The report added that execution quality, margin sustainability and cash conversion will be key, while delays linked to customer acceptance, imported components and milestone-based deliveries could keep earnings volatile. Choice remains positive on BDL, GRSE and BEL, citing healthy Q2FY27 prospects, medium-term earnings visibility and favourable risk-reward.
Rating and target prices Choice has a 'buy' rating on Hindustan Aeronautics Ltd (Target Price: Rs 5,650), Bharat Dynamics Ltd (Target Price: Rs 1,600), Mazagon Dock Shipbuilders Ltd (Target Price: Rs 3,100), Garden Reach Shipbuilders & Engineers Ltd (Target Price: Rs 3,500), Bharat Electronics Ltd (Target Price: Rs 500) and Unimech Aerospace (Target Price: Rs 1,950).
It has an 'add' rating on Cochin Shipyard Ltd (Target Price: Rs 1,565), Zen Technologies Ltd (Target Price: Rs 1,850), Centum Electronics Ltd (Target Price: Rs 3,875). It has ascribed a 'reduce' tag to Data Patterns Ltd (Target Price: Rs 4,060), Apollo Micro (Target Price: Rs 420) and Astra Microwave (Target Price: Rs 1,600). It has a 'sell rating on DCX Systems Ltd and Azad Engineering Ltd with target prices of Rs 150 and Rs 2,150, respectively.
Choice Institutional Equities said execution is expected to take centre stage for Indian defence and aerospace companies in Q2FY27, marking the start of an execution-led phase after a seasonally soft Q1. The brokerage said production and deliveries should improve sequentially across missiles, defence electronics, aerospace and shipbuilding, although quarterly numbers may remain uneven because of milestone-based revenue recognition.
According to Choice Institutional Equities, elevated order books mean the market is likely to focus less on fresh order additions and more on production ramp-ups and delivery schedules. The report said this could lead to wider earnings differentiation in H2FY27, with companies that have visible execution and diversified programme exposure likely to stand out.
Pipeline remains strong Choice said the medium-term pipeline remains robust, with QRSAM, P-75(I), Next Generation Corvettes, additional Scorpene submarines, Next Generation Missile Vessels, NGOPVs and other missile and air-defence programmes moving towards contract awards and execution.
It added that recent DAC approvals worth about Rs 1.1 lakh crore, along with an earlier package of about Rs 52,000 crore, underline opportunities across air defence, counter-drone systems, missiles, naval platforms, electronic warfare and unmanned systems. Choice said FY27 to FY30 could offer a strong multi-year manufacturing opportunity if these approvals convert into contracts and then into domestic production.
Exports emerge as second growth engine Choice Institutional Equities said exports are becoming an important second growth driver for Indian defence manufacturing. Defence exports touched a record Rs 38,424 crore in FY26, up 62.7 per cent year-on-year, with Indian products reaching more than 80 countries.
The report said the export mix is shifting towards higher-value indigenous weapon systems, with BrahMos and Akash gaining traction overseas. It noted that BrahMos' order from the Philippines, along with potential opportunities in Indonesia and Vietnam, could take its export pipeline beyond $600 million, while Akash has expanded beyond Armenia to Tajikistan and Turkmenistan.
Earnings outlook and risks Choice said Q2 should mark the transition from the strong order-book build-up of the past 12 to 24 months to a more visible H2FY27 earnings cycle. It said platform-heavy businesses remain exposed to delivery and milestone phasing, while defence electronics and specialised engineering firms may have better visibility because of shorter production cycles and multi-platform exposure.
The report added that execution quality, margin sustainability and cash conversion will be key, while delays linked to customer acceptance, imported components and milestone-based deliveries could keep earnings volatile. Choice remains positive on BDL, GRSE and BEL, citing healthy Q2FY27 prospects, medium-term earnings visibility and favourable risk-reward.
Rating and target prices Choice has a 'buy' rating on Hindustan Aeronautics Ltd (Target Price: Rs 5,650), Bharat Dynamics Ltd (Target Price: Rs 1,600), Mazagon Dock Shipbuilders Ltd (Target Price: Rs 3,100), Garden Reach Shipbuilders & Engineers Ltd (Target Price: Rs 3,500), Bharat Electronics Ltd (Target Price: Rs 500) and Unimech Aerospace (Target Price: Rs 1,950).
It has an 'add' rating on Cochin Shipyard Ltd (Target Price: Rs 1,565), Zen Technologies Ltd (Target Price: Rs 1,850), Centum Electronics Ltd (Target Price: Rs 3,875). It has ascribed a 'reduce' tag to Data Patterns Ltd (Target Price: Rs 4,060), Apollo Micro (Target Price: Rs 420) and Astra Microwave (Target Price: Rs 1,600). It has a 'sell rating on DCX Systems Ltd and Azad Engineering Ltd with target prices of Rs 150 and Rs 2,150, respectively.