Defence stocks: HAL, BEL shares gain over 2%, Nomura sees up to 30% upside

Defence stocks Hindustan Aeronautics (HAL) and Bharat Electronics (BEL) shares rose over 2% today (May 9). This comes after foreign brokerage Nomura initiated coverage on the stocks. In early trade, HAL share price is up to 2.45%, and BEL share price has rose as much as 2.78%. Nomura said that India's defence sector is witnessing major growth owing to increasing defence budgets, modernization efforts and the government initiatives like “Make in India."

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As per the brokerage, there is a significant opportunity for India’s defence sector as it expects momentum in India’s defence exports to continue.

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Nomura on HAL shares

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Nomura initiated coverage on HAL stock with a ‘Buy’ rating and put a share price target of ₹4,750 apiece. Nomura said that Hindustan Aeronautics has seen a sharp re-rating since June 2023, with 1-year forward PE shifting to 22x-42x from 16x-22x. The brokerage attributed this to MoU with GE for F414 fighter jet engine, and Approval of Necessity (AoN) for LCA Mk1A, LCH, and upgrades of Su-30 MKI.

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Nomura on BEL shares

Nomura said, “We anticipate that BEL’s premium valuations will endure, supported by enhanced visibility on the platform side, healthy return ratios, and a resilient margin profile." The brokerage forecasts ROEs to increase to 27.7% in FY26F from 23.5% in FY23 and put a ‘Buy’ rating on the stock with a share price target of ₹300 apiece.

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