Defense stocks rally on bagging contracts from MoD; BEL, BDL surge up to 8%- QHN

Shares of defense companies rallied by up to 8 per cent on the BSE in Friday’s intra-day trade after the Ministry of Defence (MoD) signed multiple contracts worth over Rs 35,000 crore with state-owned and private companies.

The MoD on March 30, 2023 signed contracts with Indian shipyards, Bharat Dynamics, Bharat Electronics, and BrahMos Aerospace Private for the procurement of various defence equipment worth over Rs 35,000 crore.

Shares of Bharat Electronics and Cochin Shipyard surged 8 per cent each to Rs 98.30 and Rs 496.10, respectively. Garden Reach Shipbuilders & Engineers soared 10 per cent to Rs 474.05 followed by Bharat Dynamics (BDL) rallied 5 per cent to Rs 1,010 and Data Patterns (India) up 3 per cent to Rs 1,399 on the BSE. In comparison, the S&P BSE Sensex was up 1.1 per cent to 58,610 at 09:34 AM.

MoD has signed 12 different contracts worth Rs 8,194 crore with BEL. These include two contracts for Indian Air Force (IAF) – 90 Electronic Warfare (EW) Suite Equipment for Medium Lift Helicopter and Annual Maintenance Contract (AMC) for Akash Missile System.

These are flagship projects showcasing the indigenous design and manufacturing capabilities of the Indian Defence industry led by BEL, involving other Public Sectors, Private Sectors and MSMEs. These projects will add another milestone to the ‘Atmanirbhar Bharat Abhiyaan’ and ‘Make in India’ initiative of the Government of India, BEL said in a press release.

With these contracts, BEL’s total orders inflow is estimated at around Rs 20,200 crore in FY23 till date, largely in line with the management’s full year guidance. As mentioned in some of the contract details, the execution period is expected to be two to four years. The current order backlog is estimated to be at around Rs 62,200 crore (3.5x TTM revenues) providing strong revenue visibility, ICICI Securities said in a note.

MoD has signed contracts worth Rs 9,781 crore with Goa Shipyard (GSL) and Garden Reach Shipbuilders and Engineers (GRSE) for acquisition of 11 Next Generation Offshore Patrol Vessels (NGOPVs) under Buy (IndianIDDM) category.

GRSE in exchange filing said that it has signed a contract with the MoD for construction of 04 Next Generation offshore Patrol Vessels today. The Total Project Cost of 04 GRSE Vessels is around Rs 3,500 crore.

With this contract, the order backlog is estimated at around Rs 24,400 crore (9.7x TTM revenues), which includes large contracts like three P-17A frigates, eight antisubmarine warfare corvettes and four large survey vessels. The strong backlog and healthy order pipeline (including a large contract of around Rs 22,500 crore expected for five next generation corvettes and other vessels) provides strong revenue visibility.

Meanwhile, BDL signed a contract for Rs 8,161 crore with the MoD for production and supply of Akash Weapon System to the Indian Army. Further BDL also received an order of Rs 261 crore for CMDS for MLH Helicopters.