Synopsis : India's defence and power sectors continue to emerge as the strongest beneficiaries of the country's capital expenditure cycle. Jefferies believes companies with strong order books, improving execution, and long-term earnings visibility are best positioned to create shareholder value in the coming years.
As India's infrastructure and manufacturing ambitions accelerate, global brokerage Jefferies remains optimistic on defence and power equipment companies, identifying them as some of the most attractive opportunities within the industrial sector.
The brokerage believes robust order inflows, healthy execution pipelines, and increasing government spending on defence modernization and power infrastructure will continue to drive growth across the sector.
Against this backdrop, Jefferies has revised target prices upward for several companies, including KEI Industries, Thermax, Data Patterns, CG Power, and Bharat Heavy Electricals (BHEL).
Defence and Power Lead India's Capex Story
According to Jefferies, defence manufacturing and power infrastructure remain the most compelling themes within India's broader capital expenditure cycle.
The brokerage highlighted that companies operating in these segments enjoy strong order visibility, expanding margins, and long-term growth opportunities supported by government initiatives and rising infrastructure investments.
Jefferies' preferred sector picks include Siemens Energy India, Hitachi Energy, Hindustan Aeronautics, Bharat Electronics, KEI Industries, and Larsen & Toubro.
KEI Industries: A Multi-Sector Growth Story
Jefferies retained its "Buy" rating on KEI Industries and increased its target price from ₹6,000 to ₹6,670, implying an upside potential of approximately 25%.
The brokerage views KEI as a comprehensive play on India's power infrastructure expansion, industrial capex growth, housing demand, and export opportunities.
With growing investments in transmission networks, real estate, and industrial projects, KEI is expected to benefit from rising demand for cables and electrical solutions.
Thermax: Riding the Industrial Recovery
Thermax continues to remain one of Jefferies' preferred industrial plays.
The brokerage maintained its "Buy" recommendation and raised the target price to ₹5,930 from ₹5,390, suggesting an upside potential of around 20%.
According to Jefferies, Thermax is benefiting from stronger industrial activity, robust order inflows, and increased demand for energy and environmental solutions.
The company has witnessed healthy growth in boiler, turbine, and generator orders, providing greater earnings visibility over the medium term.
Data Patterns: Defence Orders Drive Growth
Jefferies also maintained its "Buy" rating on Data Patterns and increased its target price to ₹4,875 from ₹4,500.
The brokerage believes the company is well-positioned to capitalize on India's growing defence spending and indigenization efforts.
Improving visibility from defence contracts, including opportunities linked to future fighter aircraft programs, continues to strengthen the company's growth outlook.
CG Power: Benefiting from Transmission Demand
CG Power retained its "Hold" rating from Jefferies, although the brokerage increased its target price to ₹840 from ₹745, indicating an upside potential of approximately 13%.
The company continues to benefit from strong demand for transmission equipment and power infrastructure solutions.
Jefferies highlighted healthy order inflows and improving margins within the Power Systems segment, supported by both domestic and international projects.
BHEL: Higher Target, Cautious View
Despite raising its target price for Bharat Heavy Electricals (BHEL) to ₹220 from ₹185, Jefferies maintained its "Underperform" rating on the stock.
The brokerage noted that BHEL's order inflows declined during FY26 and earnings fell below expectations due to weaker revenue performance.
While the long-term power sector opportunity remains intact, Jefferies believes execution challenges and slower growth may limit near-term upside.
Strong Order Books Support Future Growth
Jefferies pointed out that industrial companies continue to witness healthy order activity despite a mixed global environment.
Companies such as Siemens, ABB, Larsen & Toubro, Bharat Electronics, Hitachi Energy, and CG Power have reported strong order inflows, reinforcing confidence in India's ongoing infrastructure and manufacturing investment cycle.
The brokerage expects defence modernization, grid expansion, transmission investments, and industrial automation to remain key growth drivers over the next several years.
Outlook
Jefferies remains constructive on India's industrial, defence, and power sectors. Rising government spending, improving execution capabilities, and expanding order books are creating favorable conditions for long-term earnings growth.
While valuations in some segments have become richer, the brokerage believes companies with strong competitive advantages and healthy order visibility remain attractive opportunities for investors seeking exposure to India's infrastructure-led growth story.
Disclaimer : This article is for informational purposes only and should not be construed as investment advice. Brokerage views and target prices are subject to change. Investors should conduct their own research and consult a SEBI-registered financial advisor before making investment decisions.
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