BEL, BDL, HAL: Targets for 3 defence stocks as DAC clears Rs 2.38L cr worth proposals

B&K Securities in a fresh note on defence sector said the Defence Acquisition Council (DAC) according Acceptance of Necessity (AoN) for capital acquisition proposals worth Rs 2.38 lakh crore meaningfully strengthened India's airlift capability, deepened layered air defence, and accelerated the shift toward unmanned warfare. It suggested 'Buy' on Bharat Electronics Ltd (BEL) and Hindustan Aeronautics Ltd (HAL) and 'Hold' on Bharat Dynamics Ltd (BDL).

The domestic brokearge, a subsidiary of 360 ONE WAM Ltd, said the 'Buy & Make' structure across some platforms indicates sustained localisation tailwinds for the domestic ecosystem over the medium term, despite initial foreign OEM dependence in select segments. 

"Overall, this AoN tranche yet again reinforced three clear themes: deeper air defence layering, accelerated unmanned and ISR capabilities, and sustained localisation via Buy & Make - all of which continue to underpin a multi-year opportunity for the domestic defence ecosystem," B&K Securities said.

It said while approved AoNs do not immediately lead to orders, the scale of approval over the past few years provide comfort on order inflows for players across the ecosystem over the medium term.

"Approvals for certain products also underscore government's emphasis on inducting emerging technologies to address capability gaps and white spaces, AoN approvals for FY24 and FY25 stood at Rs 3.8 lakh crore and Rs 2.2 lakh crore, respectively," B&K Securities said. 

The sharp acceleration over the past few years suggests that the pace of ordering is likely to remain structurally elevated going forward, it added.

The brokerage suggested 'Buy' rating on HAL with an unchanged target price of Rs 5,467, based on 34 times December 2027 earnings. For BEL, it sees an unchanged target price of Rs 513, based on 45 tim4es December 2027 earnings. BDL, which is assigned Hold is given a target of Rs 1,278, based on 42 times December 2027 earnings.

B&K Securities said growth in the defence budget, particularly in capital outlay, augurs well for the broader defence & aerospace ecosystem. Defence capex (BE FY27) stands at Rs 21,9,300 crore, implying a 22 per cent increase over Rs 1,80,000 crore (BE FY26) and an 18 per cent increase over Rs 1,86,500 crore (RE FY26) it noted. 

"Notably, capital outlay now constitutes 27.9 per cent of the overall defence budget (BE FY27: Rs 7,84,700 crore), the highest share since FY15, reflecting a clear policy thrust toward modernisation and asset creation. The overall defence budget itself is up 15 per cent YoY versus Rs 6,81,200 crore (BE FY26) and 7 per cent higher than Rs 7,32.500 crore (RE FY26)," B&K Securities said.