Navratna companies are top-performing Central Public Sector Enterprises (CPSEs) in India with increased operational and financial autonomy granted by the Government of India.
In the financial year 2024, India’s defence exports saw remarkable growth, reaching ₹21,083 crore. The Indian government aims to achieve US$ 25 billion in defence manufacturing by 2025, including US$ 5 billion from exports.
Over the past two years, India’s defence exports have grown significantly. This year, the country allocated ₹6.21 lakh crore to the Ministry of Defence, which is 13 percent of the total Budget expenditure.
Recently, Jefferies highlighted that India ranks among the top three global defense spenders. Jefferies highlighted that India’s capital expenditure on defence will likely maintain a steady growth rate of 7-8% CAGR, consistent with the last decade.
Furthermore, a focus on indigenous defence production is expected to drive double-digit growth in domestic defence expenditures. These activities demonstrate growth in the Indian defence sector, leading many companies to expand their product portfolios and ramp up capital expenditure to meet demand
Here are three Navratna defence stocks planned to invest up to ₹15,000 crores to meet future defence demands.
Bharat Electronics Ltd
On Monday, Bharat Electronics Ltd shares opened at Rs 329.70 per share, up 1.74 percent on the National Stock Exchange. The company has a market capitalization of Rs 2,31,866 crores.
The company’s shares have delivered a return of around 70 percent in six months and 159 percent in a year.
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.
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The company’s product portfolio includes defence communication products, naval systems, land-based radars, avionics, electro-optics, tanks, etc.
BEL management aims for 15% revenue growth in FY25, targeting an EBITDA margin of 23-25%. The company expects large orders worth Rs 15,000 crore soon and projects order acquisitions of Rs 25,000 crore for FY25. Additionally, BEL anticipates an export order exceeding $200 million.
Over the next two years, BEL forecasts orders totaling Rs 50,000 crore and has planned a capital expenditure outlay between Rs 700 crore and Rs 800 crore.
Hindustan Aeronautics Ltd
On Monday, Hindustan Aeronautics Ltd(HAL) shares opened at Rs 5,631.25 per share, up 1.43 percent on the National Stock Exchange. The company has a market capitalization of Rs 3,70,100 crores.
The company’s shares have delivered a return of around 90 percent in six months and 197 percent in a year.
Hindustan Aeronautics Ltd(HAL) is engaged in the business of manufacturing Aircraft and Helicopters and Repair and maintenance of Aircraft and Helicopters. HAL is the largest defense PSU and Navratna corporation under the Ministry of Defence’s Department of Defence Production.It dominates the india’s aerospace industry with a market share of 100%.
Management expects a capital expenditure (Capex) plan for new projects as HAL secures new contracts. The management has planned a Capex of Rs 14,000 to ₹15,000 crores over the next 5 years, averaging nearly Rs 3,000 crores annually.
This Capex will be used to enhance manufacturing facilities, establish ROH facilities for various platforms, and invest in R&D. Additionally, it will support the infrastructure needed for the design and development of new projects like IMRH, AMCA, and other D&D initiatives.
From 2023 to 2026, UBS anticipates HAL will achieve a compound annual growth rate (CAGR) of 16% in sales and 18% in net profit, with a return on equity of 20%. Moreover, UBS expects higher local content and lower personnel expenses to support EBITDA margins.
Mazagon Dock Shipbuilders Ltd
On Monday, Mazagon Dock Shipbuilders Ltd shares opened at Rs 5,779 per share, up 1.65 percent on the National Stock Exchange. The company has a market capitalization of Rs 1,12,962 crores.
The company’s shares have delivered a return of around 143 percent in six months and 328 percent in a year.
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.
Mazagon is currently constructing the Kalvari class of submarines under Project 75 with the help of France. The sixth and final one is expected to be delivered by the end of the year. The additional submarines, it proposed, could be delivered within 6 years.
Mazagon Dock Shipbuilders Limited is a leading shipyard in India. It primarily manufactures for the defence sector and has built 801 vessels including 27 warships ranging from advanced destroyers to missile boats and 7 submarines.
The company plans to invest Rs 2,500-Rs 3,000 crores over the next 3-4 years in new infrastructure and balancing facilities to enhance its shipbuilding yard.
The Mazagon Dock recently secured an order for 6 vessels from a European client and is on track to deliver the Project 17A Stealth Frigates starting in FY 2025.
Written by Omkar Chitnis
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