3 Stocks to Watch as Andhra Pradesh Gives a Big Boost to the Aerospace and Defence Sector

With an investment of almost Rs 37.3 billion (bn), Bharat Dynamics Limited (BDL), HFCL Ltd., and Kalyani Strategic Systems will establish four major defence production units, which will significantly boost Andhra Pradesh's Aerospace & Defence (A&D) manufacturing sector.

According to reports in the The Hindu, foundation for these projects, were facilitated under the A&D Policy - 2025-30. The objectives are to identify anchor industries for A&D clusters, attract new investments worth Rs 1 000 bn, develop sub-sector focused MSME parks in hub-and-spoke model, and create employment opportunities for 0.1 million (m) people in five years.

Here are three companies that you can add to your watchlist as Andhra Pradesh gets A&D boost.

#1 Bharat Dynamics

Bharat Dynamics is an Indian public sector company established in 1970, specialising in the manufacture of guided missile systems and allied defence equipment for the Indian Armed Forces.

The company plays a crucial role as the prime production agency for missiles developed by the Defence Research and Development Organisation (DRDO), producing various missile systems including Prithvi, Agni, Akash, and Nag missiles.

In terms of fresh investments in Andhra Pradesh, Bharat Dynamics' propellant making-cum-weapon systems integration facility is likely to come up on a at Donakonda in Prakasam district with an investment of Rs 1,200 bn.

Another project for defence equipment (underwater weapons and torpedoes) manufacturing, assembly and testing facility will be set-up in in Anakapalli district.

Financial Highlights of Bharat Dynamics

Source: Equitymaster

On the financial front, the company's revenues more than doubled from Rs 5,448 m in Q2 FY25 to Rs 11,470 in Q2 FY26. The net profits for Q2 FY26 surged to Rs 2,159 m vs Rs 1,225 m YoY.

Moving ahead, Bharat Dynamics has a sizeable order book which stands at Rs 220 bn, giving revenue visibility for the next few years.

The management expects new orders for Akash-NG, Astra Mk-II and QRSAM missile systems, alongside follow-on export opportunities for the Milan 2T ATGM.

Bharat Dynamics plans to spend Rs 4-5 bn on capex over the next two years to modernise its manufacturing and testing facilities, funded entirely through internal accruals.

Investors need to watch for continued progress in project execution and margin improvements. At the moment, the company's position in the defence sector remains underpinned by strong government focus on domestic defence manufacturing.

To know more check the Bharat Dynamics fact sheet and latest quarterly results.

#2 Bharat Forge

Next on our list is Bharat Forge.

Bharat Forge is a technology driven global leader in providing high performance, innovative safety critical components and solutions for several sectors including automotive, power, oil and gas, construction & mining, rail, marine, defence and aerospace. The company has presence across 18 manufacturing locations in five countries.

In Andhra Pradesh, Bharat Forge through its subsidiary Kalyani Strategic Systems is establishing a defence energetics unit, comprising ammunition filling, gun propellant, warhead and energetics complexes at Sri Sathya Sai district with an investment of Rs 10 bn.

Financial Highlights of Bharat Forge

Source: Equitymaster

On the financial front, the company's revenues grew from Rs 36,885 m in Q2 FY25 to Rs 40,319 m in Q2 FY26. The net profits for Q2 FY26 surged to Rs 3,006 m vs Rs 2,439 m YoY.

Moving ahead, the company secured new orders worth Rs 15.82 bn including Rs 5.59 bn in defence in H1 FY26. As of H1 FY26, the defence order book stood at Rs 94.67 bn.

The company has transferred all the defence dedicated assets of Bharat Forge to its wholly owned subsidiary KSSL. On the business front Bharat Forge expects to conclude more order wins for platforms/projects.

Review of the European steel manufacturing footprint is on track, and the company expects to have concrete measures in place by the end of this fiscal.

Given the challenging demand conditions in North America, Bharat Forge is witnessing exports to that region declining further in H2 FY26.

However, Bharat Forge expects the industrial business across India, exports to non-US geographies and ramp up in defence business to more than offset the weakness in US exports.

To know more check the factsheet and latest quarterly results.

#3 HFCL

HFCL Limited (formerly Himachal Futuristic Communications Limited) is an Indian technology company specialising in designing, manufacturing, and supplying telecommunications equipment, optical fiber cables, and related solutions for telecom, defence, railways, and other sectors.

It has been allocated land by the Andhra Pradesh government for a proposed defence manufacturing facility, which will focus on artillery ammunition shells and multi-mode hand grenades (MMHG).

Financial Highlights of HFCL

Source: Equitymaster

On the financial front, HFCL reported revenue of Rs 10,433 m in Q2FY26, marking a 19.78% quarter-on-quarter growth, with EBITDA surging nearly fivefold to Rs 203.3 m from Rs 429 m in Q1FY26.

The EBITDA margin expanded to 19.49%, up from 4.93% in the previous quarter, while PAT turned positive at Rs 719m, reflecting a significant turnaround from a Rs 293 m loss in Q1FY26.

During the quarter, HFCL achieved major export wins and strong traction in its defence electronics portfolio, reflecting the successful execution of its diversification strategy.

Key milestones included orders for Thermal Weapon Sights and participation in the upgradation tender for 811 BMP-2 Armoured Fighting Vehicles for the Indian army.

To know more check the HFCL fact sheet and latest quarterly results.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

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