Defence stocks experienced a significant downturn in the stock market following the declaration of the Lok Sabha election results. On Tuesday, the shares of defence-related companies, such as Bharat Electronics Ltd (BEL), Hindustan Aeronautics, Bharat Dynamics, and Cochin Shipyard, witnessed a decline of up to 20 percent.
As a result, some of the stock market experts suggested that stocks that have seen policy favour such as PSUs, capital goods, railways or defence will see slower growth.
The defence stocks under the Modi government, with its push for indigenizing defence manufacturing under the Atmanirbhar Bharat initiative, had led to substantial returns for most defence stocks in the past year.
As the market sentiment on defence firms took a negative turn after the unexpected Lok Sabha election result, foreign brokerage firm CLSA said that the defence stocks’ valuations leave little room for execution error.
Further, CLSA downgraded Bharat Electronics to ‘outperform’ from its earlier rating of ‘buy’. On a contrasting note, the brokerage has increased its target to Rs. 294 from Rs. 207 earlier, indicating an upside potential of 15 percent.
Moreover, CLSA also expects the new Modi government to walk the talk for the defence ‘Make in India’ and execute the USD 43 billion in Indian-made products approved by the Defence Acquisition Council in the financial year 2024.
Additionally, CLSA has also retained its “outperform” recommendation on Hindustan Aeronautics with a price target of Rs. 4,731.
With a market capitalization of Rs. 1,89,652 crores, the shares of Bharat Electronics Ltd started Wednesday’s trading session on a higher note at Rs. 264.50, gaining around 2 percent compared to its previous close of Rs. 255.55 and are currently trading at Rs. 258.90 apiece.
Looking at the company’s financial statements, the revenue zoomed by 107 percent from Rs. 4,142.27 crores during the December quarter to Rs. 8,564.08 crores in the March quarter. In addition, the net profits magnified by 111 percent from Rs. 848.12 crores to Rs. 1,785.66 crores during the same period.
Comparing these metrics on a YoY basis, the revenue increased by 35 percent from Rs. 6,344.65 crores during Q4FY23 to Rs. 8,564.08 crores in Q4FY24. On the other hand, the net profits increased by 31 percent from Rs. 1,366.38 crores to Rs. 1,785.66 crores during the same timeframe.
As of 1st April 2024, the order book position of the PSU company, stood at Rs.75,934 crores and also received orders worth Rs.1,150 crores to date during the financial year 2024-25. The major orders include AMC of Akash Missile System, Combat Management System for Ships, Missile Fire Control System for ships, Laser Range Finders, Communication Network Centre etc.
Written By Vaibhav Patil
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