Defence Stocks To Buy: Bharat Electronics, HAL, Mazagon Dock Among Nirmal Bang's Bet — Check Full List

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Nirmal Bang Report

Nirmal Bang has delivered an upbeat review of the defence sector following Q2 FY26 results, highlighting robust execution and strong order inflows across major players.

Revenue/Ebitda/PAT for the defence companies under brokerage's coverage saw a growth of 19%/15%/19% as compared with estimated growth of 15%/15%/4%.

The outperformance was driven by healthy execution. Ebitda margin came in at 24.5% as compared to 25.2% mainly due to the provisions by HAL.

Top performers included Data Patterns, which posted a staggering 238% YoY revenue growth, and Bharat Dynamics, which beat estimates with 111% YoY growth, supported by a swelling order book projected to hit Rs 360 billion by FY26.

Bharat Electronics also impressed with 26% revenue growth, driven by execution of key defence programs like LRSAM and Akash Army systems.

Nirmal Bang remains bullish on the sector, citing strong government spending, localization under ‘Make in India,’ and rising export potential as key drivers.

Risks/Challenges

Working capital pressures:

Many private firms in defence historically face challenges in receivables, payment cycles, inventory buildup etc., which could impact cash flow and PAT.

Execution delays, supply chain bottlenecks, regulatory/clearance delays:

Especially true for complex platforms (ships, aircraft, missiles, electronics), which could push delivery schedules, thereby delaying revenue recognition.

Margin pressure for commoditized/sub-component contracts:

As procurement shifts from sub-assembly to system-level manufacturing, margins may fluctuate depending on mix, competition, and negotiation terms.

Geopolitical/macro-economic risks:

Raw material inflation, currency volatility, or global supply disruption may impact costs and profitability.

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