Stocks to buy: HAL, Bharat Electronics, Mazagon Dock among top defence stock picks by Antique Broking

livemint.com:

Hindustan Aeronautics (HAL) with its long-term business outlook and strong execution capabilities is well on track to report 11% earnings CAGR over FY23-26E. “Given the multi-year double-digit earnings growth potential and robust return ratio profile of +20%, we believe that the stock is attractively valued," it said. The brokerage has a ‘Buy’ rating on the stock with a target price of ₹2,590 per share, implying an upside of over 37% from Wednesday's low price.

HAL's strong order book at ₹820 billion provides revenue visibility of over 3x TTM revenue. Also Read: Stock picks: Hindustan Aeronautics, NTPC - two PSU stocks that can give up to 22% upside; here's why Bharat Electronics has over the years developed multiple levers of growth by establishing robust infrastructure, strong relationships with government entities and diversifying into non-defence businesses to create new growth avenues, analysts said. BEL reported an order inflow worth ₹203 billion in FY23 supported by orders like the improved Akash weapons order from BDL among others.

Order backlog currently stand at ₹687 billion providing revenue visibility of 3.8x its TTM revenue. BEL has guided for more than ₹200 billion order inflow to materialize in FY24E on the back of large ticket orders Bharat Electronics has been able to deliver a 20%+ operating margin on a consistent basis by increasing indigenization level and by developing local supply chains. It has guided for 21%-23% operating margin, which will be aided by gross margin improvement supported by input price easing, operating leverage as it expects 15% revenue growth, and increased indigenization levels.