Jefferies said it believes India’s defence spend should see a double-digit compounded annual growth rate (CAGR) in the medium-term in the backdrop of global geopolitical tensions.
The brokerage sees a domestic defence opportunity worth $60 billion over a four-year period. It added that India’s domestic defence capital spend should grow at a 16% CAGR over financial year 2026-2030, compared to a 10% CAGR in the overall defence capex amidst the increased focus on indigenisation.
India’s defence exports are also likely to grow at a 11% CAGR over financial year 2026-2030 to ₹58,400 crore, the brokerage said.
According to Jefferies, private sector companies particularly have visible growth prospects upwards of 20% backed by government focus on domestic manufacturing and building the private sector supply chain.
It said that the revenue data of India’s key listed defence players shows that the share of private players increased from 9% in FY23 to 16% in FY26. The defence ministry has started moving from nomination-based orders to competitive bidding to encourage private participation, Jefferies said.
Here’s a look at the stocks that it is betting on:
Solar Industries
Jefferies has initiated coverage on Solar Industries with a “buy” rating and a target price of ₹28,160 per share. This indicates an upside of 28.3% from its previous close.
The brokerage said that the company’s defence business is growing and an order pipeline provides earnings visibility.
It said the company is one of the leading manufacturers of explosives and ammunition and has expanded its capabilities to manufacture defence and aerospace products such as rockets and drones.
Solar Industries’ defence business expansion from 27% to 40% of sales should drive a 31% earnings CAGR over financial year 2026-2030.
Jefferies values Solar Industries at 70 times its estimated September 2028 price-to-earnings.
Astra Microwave Products
Jefferies has initiated coverage with a “buy” rating on Astra Micro with a target price of ₹2,055 per share. This indicates an upside of 20% from its previous closing price.
The brokerage sees an EPS CAGR of over 25% and an RoE of over 20% as the key upside drivers.
It said Astra Microwave Products is among the leading private defence and space electronics players in India and is moving up the value chain within the large defence programmes.
Astra Micro’s revenue should grow at a 19% CAGR over financial year 2026-2030 led by defence and meteorology, with operating leverage benefits driving 28% profit after tax (PAT) CAGR, Jefferies said.
Jefferies values the stock at 55x its estimated September 2028 price-to-earnings, a discount to its 65x target multiple for Data Patterns, which it said has higher proportion of proprietary in-house technologies.
Bharat Dynamics
The brokerage has initiated coverage with a “hold” rating on Bharat Dynamics with a target price of ₹1,280 per share, indicating an upside of only 3.1% from its previous close.
The brokerage said Bharat Dynamics’ robust order book provides earnings visibility, but the company’s valuations are at a premium.
Bharat Dynamics should see 30% EPS CAGR over FY26-30 on a low base as execution scales up, Jefferies said, valuing the stock at 50 times its estimated September 2028 price-to-earnings, which is a 22% discount to its five-year average P/E ratio, given the execution issues that it faces.
Here’s a roundup of brokerage recommendations on the three stocks;
| Stock | Buy | Hold | Sell |
| Solar Industries | 15 | 2 | 1 |
| Astra Microwave Products | 7 | 4 | 2 |
| Bharat Dynamics | 8 | 5 | 5 |
Stock reactions
Shares of Solar Industries are trading 1.9% higher on Tuesday at ₹22,365. The stock has risen 19% in the last one month, thereby extending its 2026 advance to 84%. The stock is trading at a record high.
Shares of Astra Micro are trading 1.7% higher on Tuesday at ₹1,741.1. The stock has now gained 77% so far this year.
Shares of Bharat Dynamics are trading 0.4% higher on Tuesday at ₹1,246.6. The stock has underperformed its peers, currently down 16% so far for the year.
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