HAL, BEL, Bharat Forge, Tata Motors, BDL get a boost from Centre’s 5th defence indigenisation list

Cochin Shipyard, Bharat Dynamics, HAL, Mazagon Dock Shipbuilders, Astra Microwave Products, Bharat Electronics, and Garden Reach Shipbuilders & Engineers traded 1-4 per cent higher in late morning deals.

Representative image. Source: Reuters

Defence-related stocks such as Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), Bharat Forge Ltd, Bharat Dynamics Ltd (BDL, Cochin Shipyard Ltd, and Mazagon Dock Shipbuilders Ltd rose on Thursday, after the defence ministry released its fifth indigenization list containing 98 items, to be procured by the armed forces from indigenous suppliers in a staggered manner over specified timelines.

Cochin Shipyard, Bharat Dynamics, HAL, Mazagon Dock Shipbuilders, Astra Microwave Products, Bharat Electronics, and Garden Reach Shipbuilders & Engineers traded 1-4 per cent higher in late morning deals.

Similarly, stocks of some of the other companies likely to be impacted by the move, such as Tata Motors, MTAR Technologies, Bharat Earth Movers Ltd (BEML) and Data Patterns, were also in demand, trading up to three per cent higher.

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ideaForge shares, however, were under pressure, trading about half a per cent lower.

The government’s latest Positive Indigenisation List (PIL) takes the total number of indigenised items to 509, after the earlier lists released between August 2020 and October 2022.

What all does the fifth indigenisation list include?

The list comprises 98 military hardware-related items, including complex systems, sensors, weapons and ammunition, which will only be procured from domestic industry after a ban on such imports kicks in under a staggered timeline. Here are some of the items on the latest list:

-Futuristic infantry combat vehicles

-Remotely piloted airborne vehicles

-Shipborne unmanned aerial systems

-Medium upgrade low endurance class tactical drone

-Next-generation low-level light radar

-Electro-optic fire control system

-Armour plates for cabin nose section for the Mi-17 helicopter

-Multifunction aviation ground equipment

-Gravity rollers for the Mi-17 V5 helicopter

-Flares of P-8I and MiG 29-K aircraft

“Due to foreign invasions, we had forgotten our innovative approach. The word ‘local’ became synonymous with low quality. We’re now freeing ourselves from that mentality. Our Prime Minister launched the ‘Vocal for Local’ campaign and restored respect for local goods. Our youth are now recognising their inner strength and eliminating inner doubts. In the coming times, they will play a big role in the development of the country with their innovative approach and knowledge,” said Defence Minister Rajnath Singh on Wednesday while releasing the list, prepared by the Department of Military Affairs (DMA) under the Ministry of Defence in consultation with stakeholders.

The country’s defence production grew 12 per cent on a year-on-year basis to cross the Rs 1 lakh crore mark in the year ended March 2023, according to Zee Business research.

While Bharat Electronics, Astra Microwave Products, Bharat Dynamics and Data Patterns (India) produce missles, radars and related systems, BEML and Tata Motors are into the production of defence vehicles.

Cochin Shipyard, Mazagon Dock and Garden Reach Shipbuilders & Engineers deal in naval equipment, whereas ideaForge Technology produces drones.

Here’s what the order books of some of these manufacturers look like, according to Zee Business research:

Companies	Order book
HAL	81784 cr
Bharat Electronics	65356 cr
Mazagon Dock	39117 cr
Cochin Shipyard	21400 cr
Bharat dynamics	20223 cr
BEML	8570 cr
Data Patterns (India)	967 cr
Astra Micro	191 cr

What analysts say

Equity Rush CEO Kunal Saraogi has a ‘buy’ call on MTAR Tech shares for targets of Rs 2,800-2,850 with a stop loss at Rs 2,500, he told Zee Business.

The stock is gaining momentum and appears to be ready for a rally, according to Saraogi.

Dharmesh Kant, Head-Equity and Derivative Research at Cholamandalam Securities recommends buying HAL shares for a target of Rs 2,600 apiece. The company has a healthy order book and is poised to benefit from the government's 'Make in India' drive, he told Zee Business.

Kant has a ‘buy’ call each on Mazagon Dock Shipbuilders and Cochin Shipyard shares from a long-term perspective, and also recommends going long on BEL and Data Patterns.

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Defence stocks Hindustan Aeronautics Limited (HAL)