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Defence Sector

ICICIdirect Research 06 Dec 2024 DISCLAIMER

The Defence Acquisition Council (DAC) has accorded Acceptance of Necessity (AoN) for 5 capital acquisition proposals amounting to over Rs 21772 crore

 This includes procurement of 31 New Water Jet Fast Attack Crafts & 120 Fast Interceptor Crafts for the Indian Navy. Tenders will be floated now from MoD or Indian Navy for these vessels, in which companies like Mazagon Dock, GRSE, Cochin Shipyard, L&T Shipyard are likely to participate

 Apart from this, procurement of EW Suite (Electronic Warfare) for Su-30 MKI Aircraft has also been approved. Bharat Electronics (BEL), Data Patterns, Astra Microwave are likely to be involved in supplying of this systems, sub-systems/components

 Also, approval has been granted for 6 Advanced Light Helicopters (ALH), where Hindustan Aeronautics (HAL) will be the key beneficiary along with BEL for electronic systems
 Mishra Dhatu Nigam (Midhani) is also expected to be the key beneficiary in supplying critical materials, superalloys and titanium alloys for these platforms. Overhaul of Sukhoi engines, T-72, T-90 and BMP tanks would also create opportunities for Midhani

 With these approvals, total approvals worth ~Rs 1.7 lakh crore have been granted by govt in this year so far (~Rs 7.9 lakh crore in the last 2.5 years), showing robust order potential for these companies. We maintain our positive outlook on defence sector for longer term, considering the healthy order backlog, execution pick-up and strong order opportunities for domestic players led by rising indigenisation

 We have a target price of Rs 4800 on HAL, Rs 345 on BEL, Rs 430 on Midhani and Rs 970 on Astra Microwave

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