Best defence stocks to buy 2025

 

Discover the best defence stocks to buy 2025. Explore investment opportunities and insights to enhance your portfolio in the booming defence sector

We are going to talk not only about how the defence spending patterns change when there are killings in the world, but also about the companies that manufacture certain equipment or items related to war. And how can these companies potentially benefit from this kind of work? We are going to understand a very important point why we should pay attention to the fundamental analysis of such companies.

Indian government on defence

Because in such cases, you can see a lot of stock names on social media, unfortunately, people blindly believe and invest in such names and ultimately make the problem worse. We have already discussed the impact of war on the stock market which is purely based on technical analysis. But today we are going to focus more on fundamental analysis. Now we have to understand what is the spending pattern of the Indian government on defence.

So, we can see that currently it is 2.3% of the GDP. But. I can see that I am talking about other global major countries or I should say other advanced economies. They are spending around 3 to 5% of the GDP. So, I can definitely say that our spending is less than their spending. If we want to match that or get close to it, our annual growth rate in this sector in the next five years will be about 78%.

History Defence Sector 

But this is about what will happen in the future because we have to analyze what happened in the past. Did defence spending increase as a percentage of gross domestic product after a situation like war. And for this we are going to analyze five scenarios including India China 1962 India India Pakistan War 1971 CH and Conflict 1984 India Pakistan Berlin 1999 and Mumbai Attack 2008 and we are going to understand whether defence spending as a percentage of GDP generally increased or not in these situations. So first, let's see what happened in 1962. For that, I will take you to this website called macroprints.net. Now if you notice, the year we were referring to was 1961.

And here you can see a huge increase in 1962 and then an immediate increase in 1963, which went straight from 2.75% defence spending as a percentage of GDP to 4.03%. Now why we are discussing this is very simple. If defence spending as a percentage of GDP increases, it means that more orders are given to different companies.

Continuous Increase

At the same time, the different companies concerned benefit, the top tier ideally grows, their profit margins should also grow. So, we checked back to 1961, that's the next one, that's 1971, that's your 1971 year, before that we had a continuous increase of 3.65% to 3.19% but we were at a 3.72% split. Next was 1984, if I am not mistaken yes, it was Kargil war. Here you can see it was 2.73 in 1998, it went up to 2.96 in 1999, it went up to 4.95 the next year and then it stayed more or less constant and finally.

This also talks about the total attack in 2008, so the spending in 2008 was about 2.63%, then 3.13%. Of course, let's not forget that 2.2008 was a situation of overall sub-crisis. So, there was a decline in the GDP number as well.

Government spends more on defence 

So, you know the equation back then was a slightly different equation but overall, I think you can understand the fact that after such situations the government spends more on defence and that is why we saw an increase. Now if this has really happened in the past. This is something that can be repeated in 2025 as well, so first of all, we are going to understand what is the overall portfolio of HAL as everyone knows. They are very famous for their page planes. I have also provided some pictures of powerful helicopters. All of them are combat aircraft or combat helicopters

We can see through the Advanced Light Helicopter Sukhoi, no mistake, their first order for Sukhoi aircraft will be placed in 2027. So again, an important one. Overall, I think you understand that if the product portfolio is strong, there is a chance that they will get more orders with the existing warrant position and more orders can be converted into convertibles. Now let's get to know about another company called BDL Dynamics Limited.

What does this company do now? They build underwater weapons of size and here you can see again a representative and at least a missile. I am showing you that you must have seen such pictures on television these days 

Anti-tank guided re-entry vehicles

So, additions are definitely an important part of warfare. And that is what DDL Dynamics Limited is making. They also do some things like anti-tank guided re-entry vehicles. So, we can imagine something like this, if the enemy is going to attack with tanks, they will do a kind of infamous act, let's say we can fire missiles and tanks can fire missiles and we can hit the target with great accuracy.

This is what this company makes and they also offer torpedoes and contributions. But if you have done Torque, I am sure you have seen this. The movie It is called Ghazi Raid. And in it we see torpedoes being fired in one of the previous wars between India and Pakistan. Go to another company called Bel Bharat Electronics Limited. They make readers and electronic functions that make their systems very important for modern warfare. They also make a product called Jenin Solutions.

Unmanned surveillance 

So, let's say they want to shut down enemy communications. This is what they make in this company called BEL, I will give you a small example. It is like a battlefield surveillance radar, BFSR is for surveillance and target acquisition. Now you can imagine the surveillance. It can include manned surveillance or unmanned surveillance. This is an example of unmanned surveillance, which is basically done by machines. One more.

The company that is attracting attention again is Mujgaon Dog Builders Limited. Because this wall is not just about the air force or the army, it is a joint effort of the army navy air force and in that case if I am talking about war through waterways the company should not go unnoticed. They are playing a major role in creating a vortex.

Zen Technologies 

This is an example of this picture of a destroyer or a frigate. They also have submarines. So overall this company is again important from a war perspective, you know. War Advanced Water Peace is coming from another company called Zen Technologies

This is an in-counter drone solution. So, I am sure you must have seen the scenes on television where if Pakistan is trying to attack us with drones, we have actually neutralized their drones, we have stopped their drones in the sky

So, there is no damage on the ground. Overall, you can see that Zen Technologies is a company that can also be very important and it is not just one company, but they are making products that offer solutions against drones. These products can be very important in the current war. You can see that this is just an example, I have taken this image from the website.

Anti-drone solution

This is an example of an anti-drone solution. I have talked about five well-known companies. Let us also understand about a small company called Idea Forced Technologies Limited. They are one of the leading defence equipment manufacturers in India. So you know what happens, usually when investors are sure about the small cap rules, they get really excited after the room. They are going to go into defence as well.

They look like this, so you can see that they are producing defence. These are images that I am taking from sources directly related to the website again. If I am talking about the revenue mix of the entire fiscal year 25th, we can see here that 59% of the revenue comes from defence capital and 41% from savings, people can go to this directory

I'm going to give you an example of what are the basic things to check before you get tempted to network i.e. 20 top line gross profit operating profit bottom line, this needs to be checked otherwise you can be in trouble in a few days. Then you start investing in that company, okay, so to give you a glimpse it looks good so far but if I check the latest quarterly results, I'll look at it and talk about why I'm not talking about it.

Spending has increased 

Revenue why look at their revenue down from 1023 million to 203 million down from 440 million to 73 million. 12 million positive 174 negative 103 positive 257 negative revenue mix. Oh my god, now 96% civil orders and only 4% different orders. The point I'm trying to make to you is, because this is a defence issue, because we currently have ethical execution, people jump into some companies without understanding their financials and analyzing them carefully. 

So as an informed investor we first need to study the current macros as a strategy. We have examined the stock from top to bottom. We said that India is spending less on defence compared to other countries. Then we said, let's understand some situations or such situations.

What happened in the past is that spending has increased. Yes, that was our conclusion. It is also appropriate in the current situation. If costs increase, which companies can benefit? That is why when we talk about what are product portfolios. Zen Technologies. We talked about several companies.

At least check the fundamentals like top-line growth, gross profit reminder, net profit, all these are order books and you check that and only then take a decision.