Jefferies Turns Bullish on Defence and Engineering Stocks; Picks HAL, Siemens, L&T and KEI Industries as Top Bets

Global brokerage Jefferies has taken a bullish stance on India’s defence and engineering sectors, naming Hindustan Aeronautics (HAL), Siemens, Larsen & Toubro (L&T), and KEI Industries as its top stock picks. The upbeat view is anchored in the strong visibility these sectors offer, especially amid a robust pipeline of government-backed projects.

Jefferies emphasised a staggering 89% year-on-year jump in defence order inflows for the companies under its coverage and believes this momentum is set to seep through the current fiscal year. To that effect, Jefferies sees operating leverage holding strong for key defence players.

HAL: The Star Performer in Defence

Among defence stocks, HAL tops Jefferies’ list, with the firm estimating a 50% upside in a bullish scenario, which could see the stock soar to ₹7,500. Even its base case is optimistic, projecting 30% gains with a target price of ₹6,475.

The base case is built on the back of a visible order pipeline worth ₹1.7 lakh crore, ensuring solid revenue visibility. The bull case, meanwhile, assumes faster defence approvals and fresh tenders, accelerating HAL’s growth trajectory.

Siemens & L&T: Strong Fundamentals in Engineering

In the engineering space, Siemens leads Jefferies’ picks. The brokerage sees the company benefitting from rising exports to its parent, improved asset turnover, and margin expansion beyond historical highs. Jefferies has pegged a bull case target of ₹4,500, a potential 36% upside, while the base case of ₹3,700 suggests 12% growth from current levels.

Next is engineering heavyweight L&T, which, despite a recent 9% rally, is expected to deliver another 9% upside in Jefferies’ base case, taking the stock to ₹3,965. This outlook is driven by an 18% revenue CAGR and better margin prospects in its hydrocarbon and heavy engineering divisions.

Under a more optimistic scenario, the stock could climb to ₹4,310, buoyed by a revival in the macro investment cycle that may lead to a surge in order inflows and valuation rerating. However, Jefferies cautions that risks such as weaker-than-expected domestic orders and further margin pressure in the Middle East could weigh on performance.

KEI Industries: Highest Upside Potential

KEI Industries emerges as the dark horse, with Jefferies forecasting the highest upside among the four. The bull case sees the stock reaching ₹5,625, implying a whopping 59% potential gain. The optimism is backed by forecasted 31% earnings CAGR over FY25–27, helped along by improving retail margins.

Even in its base case, KEI looks promising with a target of ₹4,000, reflecting a 13% upside and 25% earnings CAGR over the same period. Still, Jefferies flags risks such as a dip in exports and a decline in retail’s share of revenue, which could impact overall growth.