HAL, BEL to Bharat Dynamics: Defence stocks dip after Trump-Zelensky meeting

Stock Market today: The defence stocks as HAL, BEL and Bharat Dynamics, dipped during the intraday trade on Tuesday following a meeting between US President Donald Trump and his Ukrainian counterpart Volodymyr Zelensky.

The defence stocks have remained in focus and continued to gain in the past few months. While the operation Sindoor and the India-Pakistan conflict led to a sharp rise in the inflow of orders for domestic defence manufacturers such as Hindustan Aeronautics, Bharat Electronics and Bharat Dynamics, among others, the hopes also remained high for export orders rising amidst geopolitical conflicts.

However, the share prices have cooled down over the last one and a half months as execution worries and easing geopolitical worries weighed on sentiment. The stock further declined on Tuesday following the Trump-Zelensky meeting.

HAL share price and BEL share price dipped more than 1% during the intraday trade, while Bharat Dynamics share price lost more than 3%.

Nevertheless, despite the decline, defence stocks such as Hindustan Aeronautics, Bharat Electronics, and Bharat Dynamics, among others, have risen 33-50% in the past 6 months.

The Q1 performance of defence stocks has remained strong, adding to confidence.

Defence stocks HAL and BEL beat Jefferies' margin estimates with strong margin expansion of 831 bps and 385 bps year-on-year, respectively, driving the overall margin improvement.

Jefferies India highlighted that both management teams guided for margins to sustain or improve from FY25 levels on account of operating leverage.

Jefferies India Pvt Ltd believes that the recent Indo-Pak conflict will enhance the domestic defence manufacturing focus, and estimates a 14% CAGR in domestic defence capital spends over FY25E-30.

HAL, as per Jefferies, has a five-year growth visibility of 19% earnings per share (EPS) CAGR, driven by indigenisation, which should keep multiples elevated.

Analysts believe HAL's execution on the deliveries of Tejas Mk1A aircraft will be a key monitorable in the coming quarters.

However, Amit Anwani, Research Analyst of PL Capital Group, says that HAL is a long-term play on the growing strength & modernisation of India's air defense given that it is the primary supplier of India's military aircraft.

“The long-term sustainable demand opportunity owing to the government's push on indigenous procurement of defence aircraft is positive for HAL. Also, a robust order book with a 2-year pipeline of Rs1.0 trillion plus and a leap in HAL's technology are other positives,” he added.

Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, not Mint. We advise investors to check with certified experts before making any investment decisions.

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