Shares of shipbuilding and related services companies such as Cochin Shipyard, Mazagon Dock Shipbuilders, and Garden Reach Shipbuilders surged up to 10 percent on April 3 on high volumes amid expectations of strong Q4 earnings and healthy order book positions.
The surge also comes after domestic brokerage Prabhudas Lilladher in a thematic report highlighted that technicals suggest further upside in these stocks.
What's driving defence stocks?
Global geo-political tensions and India’s rising focus on self-reliance is fueling order flow and revenue growth for domestic defence companies, analysts at Jefferies said in their latest report. According to the brokerage, when it comes to the defence segment, the government's focus on building country-to-country relations to promote exports is another advantage.
Additionally, nearly 2x in growth in domestic defence spend for FY24E to FY30E should continue to drive stock upside. "We believe India’s capital defence spend should continue at the 7-8 percent CAGR seen in the last decade while an indigenisation focus will drive double-digit growth in domestic defence spend," said Jefferies.
Another area of opportunity for the segment, according to the foreign brokerage, is exports. Export defence opportunity could rise at 21 percent CAGR in FY23-30E, it noted.
India’s defence exports rose 16x in FY17-24E to $3 billion, and Jefferies estimates this to grow to $7 billion by FY30E with opportunities in UAE, Bhutan, Ethiopia, Italy and Egypt, amongst others.
Cochin Shipyard, after a short consolidation phase, has given a clear breakout above the rectangular box formation at 940 levels and with bias getting stronger, has scope for further fresh round of upward move, said Prabhudas Lilladher (PL) in its report, setting targets at Rs 1,120-1,270 levels. "One can maintain the stop loss at Rs 890 levels," it said.
Shares of Mazagon Dock were trading nearly 11 percent higher at Rs 2,225.25 on the NSE. So far in the day, a total of 61 lakh shares of the PSU changed hands on BSE and NSE combined, compared to one-month average trading volume of 10 lakh shares.
