GRSE, Mazagon, Cochin Shipyard, BDL shares lead defence rally, gain up to 19%

Amid renewed buying interest, shares of Garden Reach Shipbuilders & Engineers Ltd (GRSE), Mazagon Dock Shipbuilders Ltd, Cochin Shipyard and Bharat Dynamics Ltd (BDL) led rally on defence counters on Wednesday, surging up to 19 per cent.

GRSE shares surged 19.18 per cent to hit a high of Rs 1630. GRSE recently completed Contractor Sea Trials of two warships simultaneously namely the Himgiri (Yard 3022) and Androth (Yard 3035). Mazagon Dock Shipbuilders was trading 7.26 per cent higher at Rs 2549.60. Cochin Shipyard advanced 6.60 per cent to 1,428.85.

In a note, ICICI Securities said Indian defence budget’s capital outlay has increased to Rs 1.8 lakh crore, up 12.9 per cent from FY25RE and 4.7 per cent from FY25BE. It believes that the recent correction in the stock prices provides a good entry point into the space as the fundamentals largely remain unchanged.

BDL shares surged 7.30 per cent to Rs 1,208.80. Bharat Electronics Ltd (BEL) added 1.86 per cent to Rs 290.50. Hindustan Aeronautics Ltd jumped 3.19 per cent to Rs 3,693.20.

Among key recent developments, ICICI Securities noted that BEL has inaugurated its second assembly line for electronic fuses for artillery ammunition. Indian Navy has finalised Rs 36,000 crore deal with Mazagon Dock Shipbuilders and the contract is likely to be signed by FY25 end i.e. this month's end. It noted also noted that MoD has signed Rs 10,200 crore PINAKA contract with Solar Industries and Munition India Limited. 
Solar Industries India Ltd shares were up 0.99 per cent at Rs 10,182.20.

"The company is trading at a 1-year forward P/E ratio of 36.7 times, lower than its 5-year average of 38 times. We assume coverage of Solar Industries and upgrade the stock to BUY valuing it at 46 times March 27E EPS (+1SD above the mean)," Nirmal Bang said.

Antique Stock Broking has 'Buy' ratings on BDL (Rs 1,351), BEL (Rs 376), BEML (Rs 4,114), GRSE (Rs 1,783), HAL (Rs 4,887), Mazagon (Rs 2,757) and PTC Industries Ltd (Rs 19,639).

PTC Industries Ltd rose 2.06 per cent to Rs 12,793.05. BEML shares were up 4.56 per cent at Rs 2,687.95.

ICICI Securities likes Solar Industries, Azad Engineering and PTC Industries as our top picks in the space.

"We expect Solar Industries (Buy; target: Rs 13,720), PTC Industries (Buy; target: Rs 20,070), Dynamatic Technologies (Buy; target: Rs 9,330) and Azad Engineering (Buy; target: Rs 2,350) to likely be the key beneficiaries of such a policy. While the TPs for other stocks remain unchanged, we have revised the target for Azad Engineering, adjusting for the recent QIP issue," ICICI Securities said.