Vijay Diwas 2024: BEL, BDL, HAL, Mazagon Dock, Avantel Surge On Dec-16; Which Defence Stocks Are Hot To BUY?

Vijay Diwas 2024: December 16 is celebrated by India as Vijay Diwas to commemorate their victory in the 1971 war against the neighbouring country, Pakistan. On this day, India honours the soldiers who fought for their country and contributed to its historic win. Prime Minister Narendra Modi on Monday, honoured the sacrifices of the brave soldiers. Amidst this, defence stocks also traded broadly in green, with gains up to 10%. That being said, there is still an opportunity.

On Monday, PM Modi through his X handler said, "Today, on Vijay Diwas, we honour the courage and sacrifices of the brave soldiers who contributed to India's historic victory in 1971. Their selfless dedication and unwavering resolve safeguarded our nation and brought glory to us. This day is a tribute to their extraordinary valour and their unshakable spirit. Their sacrifices will forever inspire generations and remain deeply embedded in our nation's history."

Defence Stocks On December 16:

Smallcap Astra Microwave Products surged by 4.2%, while Avantel shares jumped nearly 5%. Additionally, midcap PSU Bharat Dynamics (BDL) stock soared by 2%, and private defence company Data Patterns by nearly 4.6%. Not only that, another midcap in the sector, Zen Technologies touched a new 52-week high. Additionally, Premier Explosives hit 10% upper circuit.

Furthermore, large-caps like Hindustan Aeronautics (HAL), Bharat Electronics (BEL) and Mazagon Dock Shipbuilders share prices climbed by nearly 1% to 4.14%.

Which Defence Stocks To Buy?

Brokerage ICICI Securities has selected 7 defence stocks as top picks after the Defence Acquisition Council (DAC) on December 03, 2024, accorded Acceptance of Necessity (AoN) for 05 capital acquisition proposals amounting to over Rs. 21,772 crore.

ICICI Securities note pointed out that "After a marked slowdown in domestic ordering, we view DAC approving AoNs worth INR 218bn (spanning five proposals) as a positive. Key points: 1) AoN for Fast Attack Crafts (FAC), Fast Interceptor Crafts (FIC) and ALH (M) MR likely to boost maritime surveillance capabilities. 2) Overhaul for tanks and BMPs to enhance the life of the armoured fleet of the Indian Army. 3) Focus on overhaul of Su-30MK-I likely to boost squadron strength of IAF."

In the brokerage's view, the split could be: 1) INR 90bn-100bn for NWJFAC and FIC-I; 2)
INR 30bn-35bn for EWS; 3) INR 13bn-18bn for ALH (M) MR; and 4) INR 20-22bn for each of the overhaul packages. That said, the brokerage does not see immediate benefits from the current AoNs, as the process from AoN to order conversion can take at least two years, followed by a mobilisation period of 12-18 months.

Bharat Electronics (BEL):

Among the stocks to benefit, ICICI Securities note said, "EL likely benefitting the most due to: 1) possible award of EWS package for Su-30MKI; 2) trickle-down benefit of 20-30% of the value of shipbuilding orders; and 3) overhaul of electronic components and FCS of T-72, T-90 and BMPs."

Astra Microwave:

It said, "We envisage, Astra Microwave likely benefitting from the EWS package, particularly Jammer pods and NGRWR."

Hindustan Aeronautics (HAL):

Further, the brokerage said, HAL is likely to benefit from: 1) procurement of ALH (M) MR; and 2) engine overhaul of Su-30MK-I. In engine overhaul, we also expect PTC Industries to benefit, as the company has executed an MoU with HAL's Koraput facility for the supply of critical components during the overhaul. Overhauls of the armoured fleet - entailing mechanical, electrical and FCS revamp - are likely to benefit OFBs and other players in the defence ecosystem, as indigenisation levels are likely to be high. In the case of proposals for ships, we believe that the bidding shall be competitive, as these are smaller vessels and various shipbuilders - private and DPSUs - have requisite capabilities.

Other defence picks are - Solar Industries (TP: INR 13,250; BUY); Azad Engineering (TP: INR 2,450; BUY) and PTC Industries (TP: INR 20,070; BUY). The brokerage has also recommended BUY on BDL, Dynamatic Tech, and ZEN Technologies, while it suggested ADD on HAL and MIDHANI. BEL is its top large-cap pick.

Vijay Diwas 2024:

The Indo-Pakistani War of 1971, also known as the Third India-Pakistan war, was a military confrontation between India and Pakistan that occurred during the Bangladesh Liberation War in East Pakistan from 3 December 1971 until the Pakistani capitulation in Dhaka on 16 December 1971. The war began with Pakistan's Operation Chengiz Khan, consisting of preemptive aerial strikes on eight Indian air stations. The strikes led to India declaring war on Pakistan, marking their entry into the war for East Pakistan's independence, on the side of Bengali nationalist forces, as per Wikipedia.