BEL, HAL, BDL: 3 defence stocks to buy as long-term growth visibility stays intact

Motilal Oswal Financial Services Ltd (MOFSL) on Monday maintained its constructive view on India’s defence sector and highlighted Bharat Electronics (BEL), Hindustan Aeronautics (HAL) and Bharat Dynamics (BDL) as its preferred stock ideas. The brokerage said the sector has seen a series of favourable developments, including ongoing negotiations with multiple countries for defence deals and exports, recent Defence Acquisition Council (DAC( approvals, progress on the TPCR roadmap, continued emergency procurement and expectations of a higher allocation in the Union Budget. These developments, it said, eased concerns around future order inflows and suggested that ordering activity would remain strong.

MOFSL said export opportunities would gradually open up as defence PSUs scaled up to larger platforms, while increasing indigenisation continued to support margins. It reiterated BUY ratings on BEL, HAL and BDL and kept a 'Neutral' stance on Zen Technologies.

BEL traded at 41.2 times FY27E earnings and 35.4 times FY28E earnings. MOFSL reiterated its 'Buy' call on BEL and maintained a target price of Rs 500 based on 45 times two-year forward earnings. 

HAL traded at 27.6 times FY27 earnings and 22.4 times FY28E earnings. MOFSL kept its 'Buy' rating unchanged with a target price of Rs 5,800, supported by a blended DCF approach and 32 times two-year forward earnings. 

BDL traded at 39.9 times FY27 earnings and 29.1 times FY28 earnings, and MOFSL maintained its 'Buy' rating with a target price of Rs 2,000 based on 42 times two-year forward earnings. Zen Technologies traded at 34.3 times FY27 earnings and 26 times FY28 earnings, and the brokerage retained its 'Neutral' rating with a target price of Rs 1,400 anchored on 30 times two-year forward earnings.

Meanwhile, MOFSL retained its 'Neutral' on Zen Tech rating on the stock with an unchanged target of Rs 1,400, based on the 30 times two-year forward earnings.

MOFSL said long-term visibility for the defence sector remained intact. It expected higher allocations in the upcoming Budget to expand the addressable market. It noted that Acceptance of Necessity approvals worth roughly Rs 7 lakh crore were cleared between FY24 and the first ten months of FY26, which supported multi-year order inflows. 

The brokerage also pointed to rising defence spending across NATO countries as a driver of export opportunity and referred to the Rs 40,000 crore emergency procurement programme under the Fast Track Procedure that ensured shorter acquisition timelines and sustained momentum.

The management commentaries across defence companies pointed to a broad-based pipeline. In defence electronics, companies reported strong visibility across radar, avionics, communications and electronic warfare systems. BEL expected orders for subsystems for next-generation corvettes, avionics for LCA Mk1A, mountain radars, Shatrughat and Samaghat EW systems and a large QRSAM order. Astra Microwave expected orders from QRSAM, the Uttam radar for Tejas Mk1A, EW suites, the Virupaksha AESA radar for the Su-30 upgrade and weapon-locating radars.

In missiles and explosives, companies anticipated near-term inflows from tactical missile systems, air-defence systems and follow-on precision-strike and guided-rocket programmes. BDL expected orders linked to emergency procurement, QRSAM, follow-on Astra orders from HAL and VSHORADS. Solar Industries targeted orders in loitering munitions, counter-drone systems and missile programmes such as Project Kusha, along with ammunition orders from global markets.

In defence aircraft, HAL recently received a follow-on order for 97 Tejas Mk1A aircraft. MOFSL said the near-term focus for the company remained on execution.