Brokerages pick BEL, BEML, Hindustan Aeronautics, MTAR Technologies from defence space post budget announcements

In order to reduce imports and promote Prime Minister Narendra Modi's ambitious Atma Nirbhar  Bharat, Finance Minister Nirmala Sitharaman has announced to keep 68% of defence Capex for domestic consumption. This is also aimed at encouraging private participation of MSMEs in Indian defense production.  "The government is strategically focusing on increasing indigenous defense manufacturing to become self-reliant, which is likely to benefit the Indian companies," said Reliance Securities.   

BEL and BEML 

The brokerage recommended Bharat Electronics as its top stock pick from this space.    

R&D support and private participation in defence will open up new gateway for industry with 25% of defence R&D budget earmarked.  This will also encourage private sector to take up design and development of military platforms with DRDO through SPV model."This will help BEL get betterpricing  and wider products," says the brokerage.    

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Announcement of 400 new-generation Vande Bharat trains with better efficiency is a positive for wagon manufacturers BEML.    

Hindustan Aeronautics (HAL), Bharat Dynamics (BDL) 

ICICI Securities maintained buy rating on domestic defence PSUs—Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Bharat electronics (BEL). " Higher domestic capital allocation would improve order inflow visibility and working capital for the sector."   

MTAR Technologies 

Hem Securities top pick was MTAR Technologies. Brokerage house sees an upside of 21%  in this stock from CMP of Rs 2232 to Rs 2700. It believes that the government’s boost for Aatmanirbhar Bharat in Defence, strong existing order book of the company and India’s space program grow at 7.5% CAGR over FY 2021-25 are big triggers for this stock.   

Paras defence, L&T, M&M, and Bharatforge 

As per Arihant Capital, the announcements related to Defense space are big positives for companies like MTAR, Paras defence, L&T, M&M, and Bharatforge.