India’s defence and data-centre sectors are seeing rising investments, creating opportunities across manufacturing, technology, power and infrastructure. Despite this positive business backdrop, several stocks from these themes have corrected significantly from their 52-week highs. This screen looks at 8 such companies, highlighting the extent of their correction and the business segments that continue to support their investment case.
Bharat Dynamics Ltd
Bharat Dynamics Limited is a Defence Public Sector Undertaking created mainly for producing guided missiles and allied equipment for the defense purposes. Bharat Dynamics Limited produces guided missiles, underwater weapon systems, air-borne weapon systems and other defense systems. Its product range comprises Akash, MRSAM, QRSAM, ATGMs and torpedoes and it has developed itself into a weapon system integrator.
With the market capitalization of Rs. 43,034 Crores, the shares of Bharat Dynamics Ltd were trading at around Rs. 1,175 per share which is 29 percent down from its 52 week high of Rs. 1,655 per share and is trading at a P/E of 82.7 whereas industry P/E stands at 80.8
Garden Reach Shipbuilders & Engineers Ltd
Garden Reach Shipbuilders & Engineers is a Navratna PSU in the defence sector, and the main focus of its business is shipbuilding. The firm manufactures warships through modular construction technology and has the capacity to manufacture ships, engineering products, ship repair services, and engines. Garden Reach Shipbuilders & Engineers is at present engaged in various projects for the Indian Navy and Coast Guard.
With the market capitalization of Rs. 27,537 Crores, the shares of Garden Reach Shipbuilders & Engineers Ltd were trading at around Rs. 2,404 per share which is 28 percent down from its 52 week high of Rs. 3,339 per share and is trading at a P/E of 34.2 whereas industry P/E stands at 80.8
Mazagon Dock Shipbuilders Ltd
Mazagon Dock Shipbuilders is an important shipyard and a major defence shipbuilding company of India. Mazagon Dock Shipbuilders Ltd. has been constructing warships, submarines, and several types of commercial ships for their clients in India and abroad. It constructs destroyers, missile boats, submarines, cargo ships, ferries, dredgers, and offshore platforms.
With the market capitalization of Rs. 90,442 Crores, the shares of Mazagon Dock Shipbuilders Ltd were trading at around Rs. 2,262 per share which is 26 percent down from its 52 week high of Rs. 3,061 per share and is trading at a P/E of 31.6 whereas industry P/E stands at 45.3
Techno Electric & Engineering Company Ltd
Techno Electric & Engineering commenced operations in data centres in 2021 using its expertise in electrical, mechanical, civil, and structural engineering. The firm is building data centres infrastructure and has put down plans to invest US$1 billion in the segment by FY30. The firm has an advantage in digital infrastructure due to its extensive knowledge in power and infrastructure.
With the market capitalization of Rs. 12,153 Crores, the shares of Techno Electric & Engineering Company Ltd were trading at around Rs. 1,045 per share which 30 percent down from its 52 week high of Rs. 1,489 per share and is trading at a P/E of 22.7 whereas industry P/E stands at 15.6
KEC International Ltd
KEC International undertakes EPC projects for data centres. It builds the physical and electrical infrastructure of these facilities. Its work includes civil, electrical, MEP and related systems. The company works with data-centre operators and other clients. It builds the infrastructure rather than operating the data centres.
With the market capitalization of Rs. 10,796 Crores, the shares of KEC International Ltd were trading at around Rs. 406 per share which 57 percent down from its 52 week high of Rs. 938 per share and is trading at a P/E of 18 whereas industry P/E stands at 15.4
Blue Star Ltd
Blue Star is an air conditioning, commercial refrigeration, and MEP solutions provider with over 80 years of experience. The connection that Blue Star has with the data centres is through the provision of specialized cooling solutions such as data centre chillers. These have been designed to operate continuously, cool quickly, and be energy efficient.
With the market capitalization of Rs. 32,199 Crores, the shares of Blue Star Ltd were trading at around Rs. 1,556 per share which 23 percent down from its 52 week high of Rs. 2033 per share and is trading at a P/E of 60.4 whereas industry P/E stands at 37.9
Netweb Technologies India Ltd
NetWeb Technologies offers high end computing solutions, which include high performance computing, data centre servers, private cloud, high performance storage, and AI systems. The organization has developed and manufactured supercomputing systems and infrastructure built on GPUs, making it relevant to the rising demands of data centers, artificial intelligence, and high-performance computing.
With the market capitalization of Rs. 27,673 Crores, the shares of Netweb Technologies India Ltd were trading at around Rs. 4,655 per share which 20 percent down from its 52 week high of Rs. 5813 per share and is trading at a P/E of 106 whereas industry P/E stands at 26.7
MTAR Technologies Ltd
MTAR Technologies Limited is a precise engineering organization which provides components, sub-systems, and systems to strategic industries such as defence and aerospace. The firm engages in defence business through production of high-precision components and system integration with various connections in the DRDO labs and defence organizations. It has provided components to programs like the strategic missiles of India.
With the market capitalization of Rs. 21,993 Crores, the shares of MTAR Technologies Ltd were trading at around Rs. 7,150 per share which 18 percent down from its 52 week high of Rs. 8,715 per share and is trading at a P/E of 161 whereas industry P/E stands at 24.6
Conclusion
The correction may allow these stocks to once again become relevant, but the size of the opportunity will depend on how well the business behind each company is performing, how clear their orders are, earnings, valuations, and sector risks. The mere fact that there has been a substantial correction in relation to the stock’s 52-week high does not imply that it is an undervalued stock.