Best Defence Stocks in February 2025: Hindustan Aeronautics Ltd, NIBE and More- Based on 5-Year CAGR

According to the Global Power Index, India ranks fourth in military strength with a firepower score of 0.0979, where 0.0 is the perfect score. The Indian government aims for a defence production target of US$ 25 billion by 2025, including US$ 5 billion from exports. India is one of the largest defence spenders globally, with a budget of US$ 74.8 billion (Rs. 6.21 lakh crore), which makes up 13.04% of the total budget. This is a 4.72% increase from the 2023-24 budget and an 18.35% rise from 2022-23.

In 2022, India’s military spending of US$ 81.4 billion was the fourth highest worldwide, reflecting a 6% growth from the previous year.

For FY 2023-24, India’s defence production value was Rs. 1,27,265 crore (US$ 15.37 billion), with public sector undertakings (PSUs) contributing Rs. 74,434 crore (US$ 8.99 billion).

Here’s a look at the top defence stocks in India for February 2025, focusing on companies with the best 5-year CAGR performance.

Best Defence Stocks in February 2025- Based on 5-Year CAGR

Note: The best defence stocks list here is as of January 23, 2025. The stocks are sorted based on the 5Y CAGR. 

Overview of the Defence Stocks

1. Nibe Ltd

Established in 2005, Nibe Ltd specialises in manufacturing essential components for the defence sector, electric vehicles (EVs), and software development. The company focuses on fabricating and machining components for the defence industry. It also assembles parts for EVs and offers innovative products backed by research in its EV division and the BVM R&D Foundation.

For the quarter ended September 2024, Nibe Ltd reported a revenue of ₹127.22 crore and a net profit of ₹9.40 crore. This marks an increase from the June 2024 quarter, where revenue stood at ₹109.28 crore, and net profit was ₹7.86 crore. 

Key metrics:

• Earning per Share (EPS): ₹24.2
• Return On Equity (ROE): 16.02%

2. Taneja Aerospace & Aviation Ltd

Taneja Aerospace & Aviation Ltd, established in 1994, is part of the Pune-based Indian Seamless Group. The company is involved in manufacturing and selling parts and components for the aviation industry. It also provides services related to airfields, maintenance, repair, and operations (MRO), along with other related services.

For the quarter ended September 2024, the company reported a revenue of ₹10.12 crore and a net profit of ₹4.09 crore. This reflects an improvement from the June 2024 quarter, where revenue was ₹9.14 crore and net profit stood at ₹3.47 crore. 

Key metrics:

• EPS: ₹4.93
• ROE: 9.12%

3. Sika Interplant Systems Ltd

Sika Interplant Systems Ltd is an engineering-focused company that serves the Aerospace, Defence, Space, and Automotive sectors in India. Its key business areas include engineered projects and systems, interconnect solutions, electrical module integration, maintenance, repair, and overhaul (MRO) services, and value-added distribution. The company is also a licensed defence producer and a qualified Indian Offset Partner approved by the Government of India.

For September 2024, Sika Interplant Systems Ltd reported a revenue of ₹33.24 crore and a net profit of ₹6.03 crore. In comparison, the June 2024 quarter recorded a revenue of ₹30.42 crore and a net profit of ₹5.30 crore. 

Key metrics:

• EPS: ₹52.32
• ROE: 20.17%

4. High Energy Batteries (India) Ltd

High Energy Batteries (India) Ltd, founded in 1979, is a part of the Esvin group. The company manufactures and exports advanced batteries for the Army, Navy, Airforce, and Launch Vehicles. It also produces commercial batteries for automotive and standby VRLA applications. 

In the December 2024 quarter, the company reported a revenue of ₹12.66 crore and a net profit of ₹0.67 crore. This compares to a revenue of ₹14.95 crore and a net profit of ₹1.80 crore in the September 2024 quarter.

Key metrics:

• EPS: ₹11.21
• ROE: 11.19%

5. Hindustan Aeronautics

Hindustan Aeronautics is involved in manufacturing aircraft and helicopters, as well as providing repair and maintenance services. As of FY24, its order book was ₹94,000 Cr, up from ₹82,000 Cr in FY22, with more major orders expected in FY25.

In the quarter ended September 2024, the company reported a revenue of ₹5,976.55 crore and a net profit of ₹1,490.36 crore. In comparison, for the quarter ending June 2024, the revenue was ₹4,347.57 crore and the net profit was ₹1,435.59 crore. 

Key metrics:

• EPS: ₹126.67
• ROE: 29.17%

Best Defence Stocks in February 2025- Based on Market Cap

Note: The best defence stocks list here is as of January 23, 2025. The stocks are sorted based on the market cap. 

Best Defence Stocks in February 2025- Based on Net Profit Margin

Note: The best defence stocks list here is as of January 23, 2025. The stocks are sorted based on the net profit margin. 

Important Points to Know Before Investing in Defence Stocks

• Advancements in Technology

India’s defence sector is evolving quickly with new technologies. Investors should focus on companies that invest in research and development (R&D) to keep up with the latest trends.

• Geopolitical Risks

Defence stocks can be affected by global events like border issues, conflicts, and changing government policies. These factors may impact the sector’s stability and profitability.

• Role of Government Policies

The government plays a significant role in shaping the defence sector. Investors should consider policies related to procurement, licensing, and foreign direct investment (FDI) when evaluating defence stocks.

• Defence Budget

India’s growing defence budget is a positive sign for the sector. Increased spending on equipment, technology, and exports can boost growth. Investors should focus on companies aligned with these priorities.

Tips for Investing in Defence Stocks

• Understand the Industry: Study government policies, defence budgets, and technological advancements.
• Check Financials: Invest in financially stable companies with strong growth and consistent performance over five years.
• Be Aware of Geopolitical Issues: Evaluate how global tensions and defence trends may affect the sector.
• Seek Professional Advice: Consult a financial expert to align investments with your goals and manage risks.

Risks to Keep in Mind When Investing in Defence Stocks

• Geopolitical Uncertainty: Stock prices can be volatile due to border tensions or international conflicts.
• Policy Changes: Shifts in government priorities or budgets may impact growth opportunities.
• Regulations: Stricter rules or new compliance requirements can affect operations and profits.
• Reliance on Large Contracts: Defence companies often depend on a few big contracts, which can pose risks if there are delays or cancellations.

Future of India’s Defence Sector

• Government Support: Strong backing from the government, with plans to spend ₹6 lakh crore, will drive growth.
• Technological Growth: Investments in advanced tech like AI, drones, and smart weaponry will benefit the sector.
• FDI and Global Partnerships: Increased foreign investment and collaborations with global companies are improving competitiveness.
• Export Opportunities: India is expanding its role in the global defence market, offering long-term growth for domestic manufacturers.

Conclusion

When investing in defence stocks, look for companies with solid financials, growth potential, and a balanced risk profile. Understand the sector’s complexities and consult a financial advisor to make informed decisions in this dynamic industry.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.