The Indian stock market has witnessed increased volatility in recent months, driven by global macroeconomic uncertainties, rising interest rates and geopolitical tensions.
Amid this broader correction, the defence sector—once a market darling—has also seen a pullback.
Despite strong order books and long-term growth potential, several defence stocks have come under pressure due to concerns over execution delays, margin pressures, and a temporary slowdown in order inflows.
However, with the Indian government’s continued push for self-reliance in defence manufacturing and increasing capital expenditure in the sector, these stocks could be poised for a rebound.
Many defence companies continue to report steady revenue growth, high return ratios and strong balance sheets, even as their stock prices have declined significantly from their peaks.
This has resulted in some defence stocks now trading at attractive valuations relative to their historical averages.
In this report, we highlight four such undervalued defence stocks that have seen sharp corrections but remain fundamentally strong.
While short-term pressures persist, their long-term growth prospects and strategic importance in India’s defence ecosystem make them compelling investment opportunities.
Mazagaon Dock Shipbuilders
First on the list is Mazagaon Dock Shipbuilders.
Mazagaon Dock Shipbuilders builds and repairs warships, submarines and other vessels for the Indian Navy, Coast Guard, and ONGC.
The company’s diverse portfolio includes cargo ships, passenger liners, water tankers, fishing vessels, destroyers, submarines, and corvettes.
Shares of Mazagaon have corrected 27% from their recent highs of Rs 2,930, as order execution challenges and working capital constraints weighed on sentiment. Moreover, the company is saying that the revenue growth might slow down in the coming year.
However, with a Rs 347 billion order book, as of 31 December 2024 and a strong growth pipeline, the stock remains attractively valued.
Between 2020-24, the company has reported consistent growth with sales and net profit climbing at a 5-year compound annual growth rate (CAGR) of 11.2% and 21.6%.
The company has achieved this growth without incurring any debt. The returns have also been admirable, with the Return on Capital Employed (RoCE) and Return on Equity (RoE) averaging at 24.4% and 16.3%, respectively.
Going forward, the company is planning heavy capital expenditure for its dry dock over the next 1.5 years,
» Read More
