Execution hiccups curb order flow excitement for defence stocks
Live MintThe Cabinet Committee of Security’s latest approval for orders worth ₹21,100 crore is seen as a shot in the arm for defence companies such as Hindustan Aeronautics Ltd, Bharat Electronics Ltd and Larson and Toubro Ltd. A pickup in defence approvals and orders, which were in the slow lane for much of FY25, improves the medium-term revenue visibility of defence public sector undertakings. Defence capital spending fell 20% year-on-year in H1FY25, but activity is expected to pick up in Q4FY25 with multiple large-ticket orders lined-up for finalization such as Sukhoi engines and SU-30 MKI, Antique Stock Broking Ltd said in a report on 27 December. Plus, lofty valuations of most defence stocks have grossly underestimated the risks from execution hiccups, rise in raw material costs, competitive pressures and cash flow generation. However, defence companies’ current pace of execution, and hence a subsequent bump in their topline and bottomline, remains a key trigger of any potential upside in their stock prices, Harshit Kapadia, executive vice president of institutional equity research at Elara Capital told Mint.
Discover Related
