Nirmal Bang highlighted in its note that the excitement surrounding the Defence sector is largely driven by strong order books leading to high valuations. However, conventional financial metrics fail to fully capture the industry’s true value, particularly in terms of cyclicality, profitability, and efficiency.
Nirmal Bang Securities Pvt Ltd, a leading full-service brokerage firm in India, was founded in 1986 by Nirmal Bang, Dilip Bang, and Kishore Bang. The company provides a comprehensive suite of financial services, including trading in equities, derivatives, commodities, and currencies, as well as mutual funds, insurance, and investment banking.
The brokerage also pointed out key risks to the Defence sector, including changes in the global economic and political landscape, delays in project execution due to technical complexities and bureaucratic hurdles, shifts in government policies, and geopolitical uncertainties.”
Listed below are 4 defence stocks that the brokerage has given a sell rating
Hindustan Aeronautics Ltd
Hindustan Aeronautics Ltd(HAL) is engaged in the manufacturing of aircraft and helicopters and the repair and maintenance of aircraft and helicopters. HAL is the largest defence PSU and Navratna corporation under the Ministry of Defence’s Department of Defence Production.
Nirmal Bang brokerage has issued a sell rating on HAL with a target price of ₹4,380, indicating a 10% downside from the current market price of ₹4,856.
Hindustan Aeronautics Ltd shares have gained 60 percent in the last six months and 151 percent in a year. The company has a market capitalization of Rs 3,24,757 crores.
Mazagon Dock Shipbuilders Ltd
Mazagon Dock is the country’s largest shipbuilder, both in terms of revenue and order book and is tasked with manufacturing some of the Indian Navy’s most ambitious programs, including its Scorpene class of submarines and the Visakhapatnam and Kolkata class destroyers.
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The brokerage has issued a sell rating on Mazagon Dock Shipbuilders with a target price of ₹4,143, indicating a 19% downside from the current market price of ₹5,135.
As of March 2024, the company has a substantial order book amounting to approximately ₹39,000 crore, which includes backlogs for the P-15 Bravo destroyers, P-17 Alpha frigates, and P-75 submarines.
Bharat Electronics Ltd
Bharat Electronics Ltd(BEL). manufactures and supplies electronic equipment and systems to the defense sector. The company has expertise in designing, developing, manufacturing, and supplying a wide range of strategic electronic products/systems.
The company’s product portfolio includes defense communication products, naval systems, land-based radars, avionics, electro-optics, tanks, etc.
The brokerage has issued a sell rating on BEL with a target price of ₹256, representing a potential downside of 17% from the current market price of ₹308.
The company’s shares have delivered a return of around 60 percent in six months and 142 percent in a year.
Paras Defence and Space Technologies Ltd
Paras Defence and Space Technologies, a private sector company, is primarily engaged in the design, development, manufacturing, and testing of various defense and space engineering products and solutions.
The company caters to four major segments – Defence & Space Optics, Defence Electronics, Heavy Engineering, and Electromagnetic Pulse Protection Solutions.
The brokerage has assigned a sell rating on Paras Defence and Space Tech with a target price of ₹1,181, indicating a potential downside of 10% from the current market price of ₹1,312.
Paras Defence shares have experienced significant growth, appreciating by 76% over the past six months and 95% over the past twelve months.
Written by Omkar Chitnis
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