Shares of Bharat Electronics (BEL) and Astra Microwave touched their 52-week highs in intraday trade on Friday, a day after the defence ministry approved capital acquisition proposals worth around ₹7,800 crore for the armed forces. The stocks got a lift after analyst maintained a bullish stance on these two companies, saying that they could benefit from orders that have been placed by the Defence Acquisition Council (DAC).

Union defence minister Rajnath Singh-led DAC on Thursday provided Acceptance of Necessity (AoN) to various proposals envisaging investment of around ₹7,800 crore for all three armed services. The order includes installation of electronic warfare (EW) suite on MI-17 V5 helicopters, procurement of light machine gun (LMG), bridge-laying tank (BLT), ruggedised laptops and tablets under Project Shakti and procurement of weapons for MH-60R helicopters.

Boosted by the development, shares of BEL gained as much as 2.9% to hit a fresh 52-week high of ₹138.20 on the BSE. Early today, the state-owned defence stock opened higher at ₹137.30 against the previous closing price of ₹134.30 on the BSE. The stock witnessed strong volume as 9.4 lakh shares changed hands over the counter as compared to two-week average volume of 7.55 lakh stocks, while the market capitalisation climbed to ₹98,390 crore.

In a similar trend, Astra Microwave Products rallied 7.7% to touch a 52-week high of ₹398.60 against the previous closing level of ₹370 on the BSE. The market capitalisation rose to ₹3,709 crore, with 1.7 lakh shares changing hands over the counter so far.

According to analysts at ICICI Securities, BEL and Astra Microwave could benefit from installation of an electronic warfare (EW) suite on MI-17 V5 helicopters. In addition, AoN has been given for ground-based autonomous system for mechanised infantry and armoured regiments, LMG, BLT, ruggedised laptops and tablets under Project Shakti, and procurement of weapons for MH-60R helicopters.

The agency has maintained a ‘BUY’ call on BEL with a target price of ₹150, an upside potential of 11.6% from Thursday’s closing price on the BSE. It has also retained ‘BUY’ on Astra Microwave with a target price of ₹425 apiece.

Domestic brokerage ICICI Securities says, “BEL is best placed among our covered companies, bolstered by the company’s direct or indirect participation in almost every major platform for which orders have been placed or AoN issued.” The brokerage in its report says that in the current proposal of ₹7,800 crore, BEL’s share would be around ₹2,800-3,000 crore from EW suite and others.

In the case of Astra Microwave, the agency believes that the stock is likely to benefit due to the EW products it has developed. Furthermore, it has also received orders worth ₹158 crore for supply of satellite sub-systems, airborne radar and sub-systems of radar and EW projects from DRDO, ISRO and DPSUs. The says these orders are likely to be margin-accretive for the company.

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