The Huge Wealth Creating Opportunity in Defence Stocks

Nov 26, 2020

Just a month back, we had a listing of 2 new IPOs in the market.

One belonged to a sector which was a market favorite: UTI AMC.

With India's financialisation potential, the asset management industry is likely to do well. Also, UTI is a strong brand name. The listing was expected to do well.

At the other end was the Mazagaon dock IPO.

It belonged to the 'boring' defence sector, largely ignored by the general public.

It's a sector no one talks about in their friend's circle when discussing stock markets. The IPO was not expected to do well.

What happened on the listing dates?

The unexpected happened. UTI AMC opened 12% lower than its IPO price. On the other hand, Mazagaon dock opened at a 50% premium to its IPO issue price.

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We had also asked our subscribers to subscribe to the Mazagaon dock IPO.


Because of two main reasons.

First was of course the valuation. It was trading at only 6.2 times it's expected FY20 earnings based on its issue price.

Second was the potential the defence sector offered.

The Indian defence industry is currently estimated to be around Rs 800 billion (including aerospace and Navy). The government's vision is to achieve a turnover of Rs 1,750 billion by 2025. A 17% growth rate if it happens.

Even if a small fraction of this incremental Rs 950 billion is achieved, it will be huge for India's top defence stocks.

BREAKING: Full Details of the #1 Investment of the Decade...

Another highlight was the recent embargo on 101 defence items.

India is the second largest importer of defence items. Almost 60% of the defence requirements are met through imports. With this embargo, the government has taken an important step towards 'Make in India' in defence.

We now have a huge opportunity size and an intention of making defence equipment at home.

And it seems companies have noticed this opportunity.

Bharat forge mentioned the word 'defence' 57 times in its recent annual report. The same number was 12 in the previous year's report.

HAL mentioned a 200-acre land allotment by the government in their recent annual report. This will be used to set up an explosive integration complex.

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The recent Mazagaon dock IPO was subscribed 157 times. Two years back, Hindustan Aeronautics Limited failed to get even a 1 time subscription.

There is investor interest in defence stocks now and for the right reasons.

My colleague Tanushree spoke about the potential in defence stocks in her recent video.

The size of the opportunity is huge. The intent of the government to take advantage of this opportunity is there too.

I conclude that the wealth creation in defence stocks might be huge too.

To get started on this wealth creation journey, I recommend India's #1 defence stock which Tanushree has picked.

She will be talking about this exciting stock live on Monday at the Explosive Profits Summit.

We're expecting an audience of over 10,000. I recommend you book your seat for this event right now!

Warm regards,

Girish Shetty
Girish Shetty
Research Analyst, Hidden Treasure
Equitymaster Agora Research Private Limited (Research Analyst)

PS: On Monday, Tanushree will be live at the Explosive Profits Summit. She will talk about India's best defence stock. Sign up for the summit here.

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