- Nirmal Bang raised share price targets for most defence companies ahead of Q4 earnings season
- Defence sector Q4FY26 revenue growth estimated at 4-4.5% YoY with stable backend execution
- Strong order books of DPSUs show 4-5 times revenue pipeline aiding long-term growth visibility
Domestic brokerage Nirmal Bang has raised share price targets for most defence companies ahead of the fourth quarter earnings season. The sector is expected to deliver stable growth in the March quarter, driven by backend-loaded execution across Defence Public Sector Undertakings (DPSUs) and private players, along with an improvement in deliveries of key platforms and subsystems.
Operating leverage is also likely to support margins after a muted performance in the first half of the year. Sector-wide revenue growth for Q4FY26 is estimated at around 4-4.5% year-on-year, supported by a strong order pipeline and improving execution trends, analysts said in a note.
Key outperformers are expected to include Solar Industries India Ltd., Paras Defence and Space Technologies Ltd., and Bharat Electronics Ltd.
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Check Target Price Changes
Strong Order Book
Order book visibility across DPSUs remains healthy, with companies maintaining a strong revenue pipeline of nearly 4-5 times their trailing twelve-month revenues. While execution momentum had faced disruptions due to supply-chain constraints and a shortage of skilled manpower, these challenges are gradually easing. Increasing indigenisation, technology transfers from global original equipment manufacturers (OEMs), and reduced dependence on imports are expected to improve execution efficiency and reduce delivery delays over time, Nirmal Bang said.
Policy support continues to be a major positive for the sector. FY26 has witnessed robust ordering activity, reinforcing long-term growth prospects. Acceptance of Necessity (AoN) approvals and key programmes such as the RS-6.7-ton tracked gun system, QRSAM, Astra Mk-II, Nag Missile System (Tracked), Mk-II landing platform docks, Pinaka guided rockets, and loitering munitions are expected to provide multi-year revenue visibility for major integrators such as Hindustan Aeronautics Ltd., Bharat Electronics, and Bharat Dynamics Ltd.
Defence electronics remain a structural growth theme, with rising electronic content across platforms. BEL and Astra Microwave Products continue to benefit as system integrators, while Data Patterns (India) Ltd. is emerging as a key subsystem supplier. A gradual transition of subsystem players towards Tier-1 supplier status is expected to support margin expansion and a larger share of the defence value chain.
Possible Headwinds
However, near-term risks persist. Execution delays in large programmes, dependence on global supply chains for critical components such as engines and electronics, and timing mismatches between approvals and actual order inflows could weigh on short-term performance, analysts said.
Factoring in recent market corrections and heightened geopolitical tensions, sector earnings estimates, target prices, and valuation multiples have been moderated by 10-20% over the past month. The ongoing Iran–Israel conflict, risks to the Strait of Hormuz, elevated energy prices, and shortages of critical inputs may further pressure margins through higher logistics and input costs. While the long-term outlook for defence spending remains intact, near-term execution risks and cost pressures warrant a more cautious stance on earnings visibility and valuations.
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