India’s defence stocks have been in the spotlight, hitting record market capitalisations in May, driven by strong order flows and a broader re-rating in sentiment amid rising geopolitical tensions, heightened government focus on indigenisation and a sharp uptick in defence capital expenditure.
As a result, PSU defence stocks like Hindustan Aeronautics Ltd., Mazagon Dock Shipbuilders Ltd. and Bharat Electronics Ltd. have seen renewed investor interest. While long-term prospects remain robust, the recent rally warrants a closer look at valuations, earnings visibility, and order book strength to assess which stock is a buy, sell or hold.
Q4 Performance And Order Book
Despite a weak fourth quarter showing — net profit down 7.7% year-on-year and revenue falling 7.2% — HAL’s long-term fundamentals remain compelling. Margins compressed in Q4, with Ebitda down 10.3% and a 130-basis-point fall in margins.
In fiscal 2025, the company has posted a 95.4% jump in order book to Rs 1.84 lakh crore, with Rs 1.02 lakh crore in new manufacturing contracts and Rs 17,500 crore in Repair and Overhaul contracts.
Mazagon reported a steep 51% year-on-year decline in net profit for the quarter ended March, mainly due to a spike in subcontracting costs and other project-related expenses. Despite revenue growth of 2.3%, margins deteriorated sharply.
BEL delivered a strong fourth quarter with 18.4% year-on-year jump in net profit and Ebitda margin expansion to 30.8%, beating estimates. The company closed fiscal 2025 with Rs 18,715 crore in new orders and a Rs 71,650-crore order book.
In terms of stock performance, BEL has risen 51.37% in the last one year, while it is up 34.44% year-to-date. HAL was up 16.25% in the last 12 months, while it rose 21.44% year-to-date. Mazagon has performed comparatively better with a 145.06% growth in 12 months and 53.91% year-to-date.
What Analysts Have To Say
Jefferies has picked HAL as its top defence stock, citing 214% growth in financial year 2025 order inflows and a projected 19% EPS CAGR over five years. Margin expansion was notable, with HAL and BEL improving annual margins by 831 basis points and 385 basis points, respectively. Both are expected to sustain or improve profitability in financial year 2026, aided by operating leverage and execution strength.
Macquarie is optimistic about BEL’s long-term growth, particularly its Rs 20,000-crore indigenous missile system project with the DRDO and growing export traction. While BEL saw a rise in working capital, this is not seen as a concern. Continued research and development and capex investments are expected to fuel future growth.
Nirmal Bang sees margin expansion ahead for Mazagon, driven by large submarine projects and digital upgrades. The stock, however, is trading at a forward P/E of 36.2x, significantly above its three-year average.
WealthMills Securities’ Kranthi Bathini, who has been bullish on defence stocks since January, pointed out that each company has distinct strengths. He added that long-term prospects remain strong.
However with the recent rallies of over 52% from their recent lows may lead to short-term consolidation. He advises profit booking in the short term for investors holding on to defence stocks for a while and buy on dip or hold for long term.
Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.
. Read more on Markets by NDTV Profit.WealthMills Securities’ Kranthi Bathini, who has been bullish on defence stocks since January, expects a short-term consolidation. Read MoreMarkets, Business, Notifications
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