19 hours ago 3

Target locked: Amit Dixit’s top 3 defence picks as sector gears up for growth

Mar 22, 2025, 01:53:36 PM IST

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Defence sector in action

India's defence sector is witnessing a strong pickup in momentum after a relatively quiet period. As Q4 unfolds, both domestic and international developments are driving renewed interest in the space. According to Amit Dixit, Senior Analyst, ICICI Securities, Q4 is really brimming with activity, both international as well as on the domestic front.

In an interaction with ETNow, Dixit highlighted several major developments: the clearance of the 7,000-crore ATAGS Howitzer order, the Pinaka system in February, and broader reforms in the capital acquisition process. These reforms, he emphasized, are key to accelerating the order finalisation process.

IANS

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Capital acquisition reforms to boost execution

"The much overlooked piece is the reforms in the capital acquisition process," said Amit Dixit. With large-scale orders like P-75 submarines, LCA Mark-1A, QRSAM, and Prachand helicopters lined up, these reforms are expected to significantly expedite defence procurement and execution cycles.

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Revenue outlook and execution trends

Dixit noted that revenue trends will differ across companies, but growth is evident. "In the case of shipbuilders though, we believe that this year and FY26 possibly would be the year of peak execution... post that it would be a little bit flat." He added that companies like Bharat Electronics could see 15–16% YoY execution growth in the next 2–3 years.

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Challenges and execution pick-up across players

While some companies are facing challenges, others are gaining momentum. Dixit explained, "HAL... have the capacity to produce 16 LCA Mark-1A... but the engine is the only elusive part." He expects HAL’s execution to improve from FY26. Meanwhile, Bharat Electronics and Bharat Dynamics are seeing stronger execution, with the latter benefiting from the resolution of MRSAM-related issues.

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Private sector steals the spotlight

Private sector defence companies are showing robust growth. "Look at Azad Engineering, for example. Their revenue growth is expected to be 30% to 35% this year... Solar Industries... revenue from domestic defence is expected to be around 1450 to 1470 crores this year compared to 500 crores last year."

ANI

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What’s attractive and what’s not

According to Dixit, high valuations are not a deterrent if growth visibility is strong. "We like the companies that are trading at high valuations, such as Solar Industries, PTC Industries, Azad Engineering... we see a very long runway for growth in these companies." He warned, however, that shipbuilders may be valuation traps due to their long execution timelines.

Agencies

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Top stock picks in defense

Amit Dixit named his top three defence stock picks with robust return potential:

Solar Industries – Target price: Rs 13,720

PTC Industries – Target price: Rs 20,070

Azad Engineering – Target price: Rs 2,350

He added, "That is clearly more than 20% return that we are targeting for these stocks."

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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