The defence and power sector stocks are in focus. The brokerage firm Jefferies sees them as the next major theme in the market. The brokerage house in its report pointed out the steady order flows and clearer earnings visibility across key companies. According to the brokerage, the latest quarterly trends show that these two sectors continue to attract meaningful capital expenditure. They have identified key stocks in this sector.
Let’s take a look at the stocks nd the investment rationale driving the brokerage’s recommendation
Jefferies on Defence and power sector: Preferred stock ideas
Jefferies top recommendations include Siemens Energy, Hindustan Aeronautics (HAL), Larsen & Toubro (L&T), Hitachi Energy, and KEI Industries. These names, according to the brokerage, are best placed to benefit from a pick-up in industrial activity and higher allocations towards defence modernisation and power infrastructure.
The report noted that order flow in the September quarter grew 23% year-on-year, supported by strong booking activity at L&T, Bharat Electronics (BEL) and CG Power. It added that “BEL and Data Patterns combined saw 2.2x YoY order flow rise,” indicating continued traction in defence electronics. At the same time, “SE order flow was flat YoY as orders were front loaded in 9MFY25 which saw 66% YoY order flow growth.”
However, margin movement was mixed across companies. Jefferies pointed out that “ABB saw 344 bps YoY margin decline,” while “HAL margins were weak in the September quarter, down 400 bps YoY.”
Why Jefferies prefers defence and power sector?
Jefferies believes defence and power offer the clearest multi-year visibility due to a healthy investment pipeline. As per the report, “defence and power remain the best way to play the sector.”
Jefferies has also outlined its target prices for these stocks based on the sector outlook and current order flow trends. The brokerage has set a target of Rs 4,000 for Siemens Energy (Upside – 28%), while HAL has been assigned a target of Rs 6,220 (Upside – 37%). For Hitachi Energy, the estimated level is Rs 25,000 (Upside – 12%), and L&T has a target of Rs 4,715 (Upside – 10%). In the case of KEI Industries, Jefferies has indicated a target price of Rs 4,855 (Upside – 17%).
What Jefferies expects from its top picks in defence and power sector
According to the brokerage, the growth outlook across its preferred names is tied to steady capital expenditure plans and the visibility of ongoing projects. Jefferies notes that
“Defence and power standout on capex visibility; company-specific triggers also exist.” Siemens Energy is expected to benefit from a healthy power capex cycle, which could support stronger earnings over the next two years.
Hindustan Aeronautics is seen with multi-year revenue stability as indigenisation-led orders continue to shape its pipeline. Hitachi Energy’s outlook is linked to the execution of its large order book, with margin movement guided by operating leverage. Engineering major Larsen & Toubro is viewed through the lens of stable guidance and a consistent order environment. For KEI Industries, Jefferies highlighted its exposure across power, housing and export markets, suggesting that demand visibility remains spread out across segments.