Jefferies sees $60-bn defence opportunity, starts coverage on two firms

Brokerage expects domestic defence capital expenditure to grow at a 16% CAGR through FY30 and initiates coverage on Solar Industries and Astra Microwave with 'Buy' ratings

Global brokerage Jefferies has forecast a double-digit compound annual growth rate (CAGR) for India's defence spending over the medium term, citing heightened global geopolitical tensions. It has initiated coverage on two private defence players while flagging rich valuations for state-run peers.

 

In its report, Jefferies estimated that India's domestic defence capital expenditure would grow at a 16 per cent CAGR between FY26 and FY30, outpacing the 10 per cent CAGR projected for overall defence capex, as the government's indigenisation push continues.

 

The brokerage pegged the cumulative domestic opportunity at over $60 billion across four years.

 

Nifty India Defence rose 2.5 per cent on Tuesday, ending at 9,998.7, surging for the fourth consecutive trading session. The index has surged over 29 per cent year-to-date. 

  

“Defence exports are also gaining momentum as operational validation of Indian-made systems such as Akashteer command & control system and BrahMos missiles during Operation Sindoor has improved export credibility. Our estimates factor defence exports rising at an 11 per cent CAGR over FY26-30E to ~584 billion,” notes the report. 

 

Private sector participation is climbing steadily, according to the report, with listed private players' share of defence revenue rising from 9 per cent in FY23 to 16 per cent in FY26, aided by the Defence Ministry's shift from nomination-based orders toward competitive bidding under the draft Defence Acquisition Procedure 2026.

 

Jefferies initiated coverage on Solar Industries with a "buy" rating and a price target of ~28,160, citing an expected 31 per cent earnings CAGR through FY30 as its defence business share rises from 27 per cent to 40 per cent of sales. It also initiated coverage on Astra Microwave with a "buy" and a target of ~2,055, expecting 28 per cent profit after tax CAGR on the back of a 19 per cent revenue CAGR.

 

Bharat Dynamics, India's primary missile manufacturer, was initiated with a "hold" rating and a target price of ~1,280, with Jefferies noting the stock trades at a premium despite persistent execution issues, even as it forecast 30 per cent EPS CAGR through FY30.

 

Among existing coverage, Jefferies maintained "buy" ratings on Hindustan Aeronautics (target ~6,800), Bharat Electronics (~490) and Data Patterns (~5,545), citing strong order visibility across the sector even as current valuations price in much of the near-term growth outlook.