Top Defence stocks in India – Defence Stocks: 2025 Year of Reforms

In a significant move, the Ministry of Defence has declared 2025 as the ‘Year of Reforms.’ Defence Minister Shri Rajnath Singh has emphasized that the “‘Year of Reforms’ will be a momentous step in the modernisation journey of the Armed Forces. It will lay the foundation for unprecedented advancements in defence preparedness, ensuring India’s security & sovereignty amidst the challenges of the 21st century”. With this in mind, the year 2025 brings blooming opportunities for the top defence stocks in India.

Defence production in India has crossed ₹1.27 lakh crore and is expected to reach ₹1.75 lakh crore in the current fiscal year. By 2029, India aims to hit ₹3 lakh crore in defence production. This will position India as a global defence manufacturing hub. Further, defence exports have seen a huge surge. They jumped from ₹686 crore in FY 2013-14 to ₹21,083 crore in FY 2023-24. This is more than a 30-fold increase. The target is to raise exports to ₹50,000 crore by 2029.

The atmosphere is very positive for the top defence stocks in India. Let’s take a closer look at some of the defence PSUs and public enterprises that stand to benefit from India’s defence sector revolution.

Also explore the Best Defence Stocks In India: Defend and Grow

Rise in India’s Defence Production- top defence stocks in India.

Because of Atmanirbharta, India’s defence sector is changing fast. According to data from all Defence Public Sector Undertakings (DPSUs), the value of defence production has reached ₹1,27,265 crore (US$ 15.37 billion). This is a huge jump of 174% from ₹46,429 crore in 2014-15.

In the past, India relied on other countries for defence equipment. Around 65-70% of the equipment was imported. But things are different now. About 65% of defence equipment is now made in India.

This shift shows how strong India’s defence industry is becoming. India has 16 Defence Public Sector Undertakings (DPSUs) and over 430 licensed companies. There are also around 16,000 Micro, Small, and Medium Enterprises (MSMEs) in the sector. The private sector contributes 21% of the total production.

India’s push for self-reliance in defence is gaining momentum. It’s a major step towards strengthening national security. (Source: pib.gov.in)

Government Initiatives Towards Defence Modernisation

The growth in the defence sector is driven by strong policy reforms and improvements in the ease of doing business.

Budget Allocation: The Ministry of Defence received ₹6,21,940.85 crore for 2024-25. This is part of the “Demand for Grant” in the current Budget Session.

iDEX Scheme Launch: The government launched the Innovations for Defence Excellence (iDEX) scheme. It invites startups and MSMEs to drive defence innovation.

Indigenization Portal: The government introduced the SRIJAN portal. It aims to boost indigenization by Indian industries, including MSMEs. (Source: pib.gov.in)

Top Defence Stocks in India: 2025-‘Year of Reforms’

The top Defence Stocks in India are: Hindustan Aeronautics Ltd, Bharat Electronics Ltd, DCX Systems Ltd, Garden Reach Shipbuilders & Engineers Ltd, Zen Technologies Ltd, PTC Industries Ltd and Sika Interplant Systems Ltd.

Let’s Explore Some Of The Top Defence Stocks in India

Bharat Electronics Ltd

Current Price: ₹ 287 | 52 Week High (10-Jul-2024): 340.50 | 52 Week Low (13-Feb-2024): 171.75

Bharat Electronics Ltd. (BEL), founded in 1954, is a large-cap company with a market cap of ₹2,13,408.99 crore. The company’s Return on Equity (ROE) stood at 24.4% last year, consistently above 20%. This shows efficient use of shareholder capital to generate profits. BEL has been debt-free for the past five years. Its Interest Coverage Ratio is 800.64, far higher than the ideal threshold of 1.5. This indicates BEL easily covers its interest payments through earnings (EBIT). The Price-to-Earnings (PE) Ratio is 46.55, lower than the sector average of 61.51, making the stock undervalued and an attractive opportunity.

The company’s Annual Revenue grew by 16.23% last year, reaching ₹20,938.38 crore. This outpaced the sector’s average growth of 10.75%. BEL’s Annual Net Profit jumped 33.51% to ₹3,984.52 crore, slightly above the sector’s average profit growth of 33.44%.

3-Year Performance:

-Profit Growth Compounded: 24%
-CAGR for Stock Price Growth: 61%
-Growth in Compound Sales: 13%
-Equity Return: 23%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: 37%
-CAGR for Stock Price: 57%
-Growth in Compound Sales: 19%
-Equity Return: 26%

The company exhibits signs of growth. With its reputation and position, it has notable potential for expansion in the coming years. Read the Full analysis here: Bharat Electronics Limited Share Soar to New Heights: The Analysis

DCX Systems Ltd

Current Price: ₹ 373 | 52 Week High (3-Jul-2024): 451.90 | 52 Week Low (13-March-2024): 235.30

DCX Systems Ltd. is a small-cap company with a market cap of ₹4,109.05 crore. Its Return on Equity (ROE) for the last financial year was 6.72%, which is below 10%. This shows the inefficient use of shareholder capital to generate profits. The company’s Debt-to-Equity Ratio is 0.26, well below 1. This indicates that its assets are primarily financed through equity. The Interest Coverage Ratio stands at 4.35, comfortably above the benchmark of 1.5. This means DCX can easily meet its interest payments using its earnings (EBIT).

The Price-to-Earnings (PE) Ratio is 77.66, which is higher than the sector average of 61.51, making the stock appear overvalued. Annual Revenue grew by 14.81% last year, reaching ₹1,473.23 crore. This surpassed the sector’s average growth of 10.75%. However, the Annual Net Profit increased by only 5.72%, reaching ₹75.78 crore. This is much lower than the sector’s average profit growth of 33.44%.

3-Year Performance:

-Profit Growth Compounded: 37%
-CAGR for Stock Price Growth: NA%
-Growth in Compound Sales: 30%
-Equity Return: 17%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: -38%
-CAGR for Stock Price: 5%
-Growth in Compound Sales: -5%
-Equity Return: 9%

In summary, DCX Systems Ltd showcases impressive figures across various parameters.

Garden Reach Shipbuilders & Engineers Ltd

Current Price: ₹ 1,577 | 52 Week High (5-Jul-2024): 2,833.80 | 52 Week Low (13-March-2024): 673.45

Garden Reach Shipbuilders & Engineers Ltd. is a mid-cap company with a market cap of ₹18,819.75 crore. Its Return on Equity (ROE) for FY 2023-24 stood at 21.34%, higher than its 5-year average of 16.74%. This highlights the efficient use of shareholder capital to generate profits. The company has a Debt-to-Equity Ratio of 0.03, well below 1, showing its assets are primarily financed through equity. Its Interest Coverage Ratio is 46.46, comfortably above the threshold of 1.5. This indicates GRSE easily meets its interest obligations using its earnings (EBIT).

The Price-to-Earnings (PE) Ratio is 46.77, which is lower than the sector average of 61.51. This suggests the stock is undervalued, making it an attractive option. Annual Revenue grew by 40.87% last year, reaching ₹3,892.26 crore. This significantly outpaced the sector’s average growth of 10.75%. The company’s Annual Net Profit jumped by 56.61% to ₹357.27 crore, surpassing the sector’s average profit growth of 33.44%.

3-Year Performance:

-Profit Growth Compounded: 29%
-CAGR for Stock Price Growth: 84%
-Growth in Compound Sales: 47%
-Equity Return: 18%

Twelve-Month Trailing Period (TTM) Performance:

-Profit Growth Compounded: 39%
-CAGR for Stock Price: 90%
-Growth in Compound Sales: 39%
-Equity Return: 22%

The stock can significantly benefit from the government’s policies and initiatives.

Discover the Best Shipbuilding Stocks in India: From Shipyards to Stock Markets

Conclusion

The year 2025 promises to be a pivotal year for the top defence stocks in India. The country’s defence sector is growing rapidly, with a clear focus on becoming Aatmanirbhar. The government’s efforts to reduce reliance on imports and boost domestic manufacturing are driving this transformative shift. As India strengthens its own security needs, it also positions itself as a major player in the global arms market. With these changes, defence stocks are well-positioned to benefit from the government’s strategic announcements and initiatives.

That’s all for today’s post. Hope you get some valuable insights from here.

Happy reading!

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a while. The post does not have any direct recommendations about investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.