BEL, HAL, BDL shares: Which defence stock offers highest upside? Target prices

Bharat Dynamics Ltd (BDL) offers higher upside potential than Hindustan Aeronautics Ltd (HAL) and Bharat Electronics Ltd (BEL), consensus data on the three defence PSUs following their September quarter results suggested.

BEL has a consensus 'Buy' rating, with 38 'Buy' calls and just one 'Sell' call. Its 12-month target price of Rs 494.12, based on 34 estimates, suggests 22.4 per cent upside. The highest targets on the stock, set by UBS and Macquarie at Rs 550, indicate up to 38 per cent upside from the prevailing price, while Kotak's lowest target still implies 5.53 per cent potential upside.

HAL, on the other hand, has 27 'Buy', two 'Hold' and two 'Sell' calls, with a Bloomberg 12-month consensus target price of Rs 5,681, implying 17.9 per cent upside.

"Despite the miss on Ebitda, HAL's Q2FY27 revenue and EPS were in line with our estimates. Going forward, we see three catalysts: streamlining of F-404 engines from GE Aerospace; likely delivery of Tejas Mk-1A fighter jets; and an increase in helicopter deliveries as key stock performance drivers. The despatch of seven F-404 engines in August and September 2026 by GE Aerospace removes a major uncertainty in our view," Goldman Sachs said.

The foreign brokerage said it sees considerable valuation support for HAL's stock, as it is the only defence stock under its coverage trading at below 30 times earnings. "We retain our Buy rating on HAL stock with an unchanged target of Rs 5,870 per share," Goldman Sachs said.

CLSA described HAL as the cheapest pure-play Indian defence major despite its high entry barriers and high-ROE business.

In the case of BDL, the stock has seen price target cuts following its Q2 results. Goldman Sachs suggested a 'Sell' rating and cut its target to Rs 1,060 from Rs 1,150. HSBC lowered its target to Rs 1,240 from Rs 1,370, DAM Capital to Rs 1,350 from Rs 1,560 and Antique to Rs 1,459 from Rs 1,597. Yet, based on a median of 19 analysts, BDL has a consensus target price of Rs 1,339.58, suggesting 27.7 per cent potential upside, Bloomberg data compiled by Business Today showed.

BDL's Q2 revenue growth suggested that execution, particularly of Akash Weapon Systems (AWS), has picked up. That said, higher deliveries of bought-out components resulted in lower margins.

"Going ahead, the execution of platforms with higher bought-out components is seen constraining Ebitda margin within 15 per cent," Goldman Sachs said.

On BEL, Nomura said the defence PSU delivered a healthy operating performance in Q2, resulting in a strong beat on consensus estimates. Notably, the Cabinet Committee on Security (CCS) has approved a Rs 40,000 crore project to build eight next-generation corvettes (NGC) for the Indian Navy.

"In our view, this is likely to result in order inflows (OI) of Rs 7,000-7,500 crore for BEL in Q3. We believe BEL's OI outlook can improve even further if its consortium with L&T is selected as the preferred bidder for the Rs 15,000 crore AMCA (Advanced Medium Combat Aircraft) programme, for which bids have already been submitted and are currently under technical evaluation," Nomura said.