Mayuresh Joshi, Head-Equity Research at William O’Neil India, on Wednesday selected three stocks from the defence space, one from the PSU segment and two private players. From the state-run defence companies, the market expert chose Bharat Electronics Ltd (BEL) while he preferred ZEN Technologies and Paras Defence and Space Technologies Ltd from the private basket.
“A lot of our defence companies are now producing world-class products. Therefore, I think the opportunities are twofold, one in terms of the enhanced budget spending and the second element is that most of these companies are already sitting on decent order books. This implies that the revenue visibility over the next four to six years probably remains intact. These orders are coming with decent margins. The only risk factor is execution. I think execution should also continue at a decent pace,” Joshi told Business Today.
“In addition, Europe is actually looking at a budget spend. There are so many countries, which after Operation Sindoor, are looking at the technological prowess in terms of these indigenously developed technologies that our companies have probably delivered and therefore exports as a tool can also come out to be a surprisingly big opportunity for these players with far better margins. I think there is a huge opportunity in front of them and these companies might do well,” he also said.
He advised those holding BEL shares investors should continue to hold on to the counter. “Shipbuilders are expected to continue doing well. Valuations are on the higher side but I think it’s all going to be a play in terms of topline growth. I’m not expecting exponential or outrageous growth happening on a year-on-year (YoY) basis. But even if it’s a decent growth coming through with better operating leverage, I think those premium valuations might just sustain, assuming that numbers still keep on coming,” the market specialist stated.
When asked to share views on the private defence companies, he said Zen Tech and Paras Defence have done amazing work as far as operations are concerned. “So, I think Zen Tech is one stock that one should continue to hold. Paras Defence is also doing well in the space as well. Return ratios and balance sheet of these companies remain extremely strong,” he underscored.
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