HAL, Mazagon Dock or Solar Industries? Kotak Securities initiates coverage, sees upside only in HAL- Grow Mudra

HAL, Mazagon Dock or Solar Industries? Kotak Securities initiates coverage, sees upside only in HAL

14 Jul , 2026 By : Debdeep Gupta

Hindustan Aeronautics Ltd (HAL) will be in focus after Kotak Securities initiated coverage on the defence stock with an 'ADD' rating and a fair value of Rs 4,810, while assigning 'SELL' ratings to Mazagon Dock Shipbuilders (MDL) and Solar Industries, despite remaining constructive on the sector's long-term growth.

In a note on Monday, the brokerage said, "We believe India's defense sector is on a multi-year structural upcycle," driven by "an 11?GR in capital expenditure over FY2026-30E, surging acceptance of necessity (AON) approvals (10X over FY2021-26 to Rs 9.3 trillion), and a secular push toward indigenization with domestic procurement share rising from 54% (FY2019) to 70% ."

Kotak Securities believes Indian defence companies are "well-positioned to benefit from rising geopolitical tensions, accelerating modernization programs and an expanding export opportunity."

On its stock calls, the brokerage said, "We initiate coverage on HAL (ADD), MDL (SELL) and Solar Industries (SELL). Maintain ratings on BEL (REDUCE) and CSL (SELL)."

Kotak Securities has assigned a fair value of Rs 4,810 to HAL, Rs 1,950 to Mazagon Dock Shipbuilders and Rs 10,300 to Solar Industries.

The brokerage expects government spending to remain a key growth driver, saying, "We forecast defence capex at 11?GR over FY2026-30E, reaching Rs 2.8 trillion." It added that "AoN approvals have surged 10X over FY2021-26, implying Rs 6.5-7 trillion in new orders during FY2027-29E."

On exports, Kotak Securities said, "Indian defence exports have grown 50X over the past decade," adding that "The Rs 500 bn target by FY2029 is the next key milestone."

The brokerage also highlighted drones as a major opportunity, saying, "Drones are fundamentally transforming warfare economics," and estimates that "India will spend $25-30 billion on drones and $4-5 billion on counter-drone systems over the next decade."

Despite the favourable industry outlook, Kotak Securities cautioned that "Indian defence companies trade at a 50% valuation premium over global peers (50X 1-year forward P/E versus 28X)," leading it to remain selective in its recommendations with HAL as its preferred pick among the stocks under coverage.