Private defence companies could outperform public sector undertakings (PSUs) in Q2 FY27, with select players expected to benefit from stronger execution, higher realisations and company-specific growth drivers. ICICI Securities remains constructive on Hindustan Aeronautics (HAL), Bharat Electronics (BEL) and Azad Engineering.
The Indian defence sector is likely to deliver mixed performance in the September quarter, with private-sector players expected to outpace their public-sector counterparts. While first-half execution has historically been weak, select private companies could report stronger-than-expected growth, partly supported by order execution spilling over from the June quarter.
According to ICICI Securities’ Q2 FY27 preview, most private defence companies are expected to post higher double-digit revenue growth, while PSU defence companies could report growth ranging from flat to the lower double digits. PSU margins may remain steady or contract amid changes in product mix and input cost pressures.
Excluding outliers in its defence coverage, the brokerage expects average revenue growth of around 13% year-on-year in Q2 FY27. Zen Technologies, Solar Industries India and Azad Engineering are likely to stand out, with projected revenue growth of 55%, 52% and 30%, respectively.
Private defence players likely to outgun PSUs
Zen Technologies is expected to report strong execution, with revenue projected to rise 55% year-on-year and 90% sequentially in the September quarter. Solar Industries India could benefit from higher realisations in its international and defence businesses, supporting an estimated 52% revenue growth.
Azad Engineering is expected to post 30% revenue growth, while its EBITDA could increase 34% year-on-year. Its margins are likely to remain elevated, partly aided by rupee depreciation.
Dynamatic Technologies is also expected to deliver a strong quarter, with EBITDA projected to grow around 31% year-on-year. The anticipated performance is supported by the start of A220 aircraft door deliveries in its aerospace business and strong demand in hydraulics.
The outlook for defence PSUs is more measured, with execution likely to remain uneven across companies.
HAL, BEL and other defence PSU stocks: What to expect?
Bharat Electronics and Mishra Dhatu Nigam (MIDHANI) are expected to deliver relatively steady execution, with revenue growth of around 15% each, according to ICICI Securities. BEL’s margins could also be at the upper end of its guided range.
Hindustan Aeronautics, meanwhile, could report a relatively muted quarter, with revenue expected to rise 6% year-on-year. A higher base and further delays in Tejas Mk-1A deliveries are likely to weigh on its performance.
Bharat Dynamics (BDL) could face a weaker quarter, with revenue, EBITDA, and profit after tax projected to decline by 2%, 15%, and 17%, respectively, year-on-year. This is despite an anticipated pick-up in Akash missile execution.
Astra Microwave Products is expected to post moderate revenue growth of around 10%, with execution likely to be weighted towards the second half of FY27.
Defence order book: Large order wins likely in H2 FY27
The pace of fresh order awards remained muted for most defence companies in the first half, with several large contracts delayed. Consequently, order books are expected to remain broadly flat, although private-sector players could fare marginally better, according to the brokerage.
The government has approved Acceptance of Necessity (AoN) proposals worth ₹8–9 lakh crore since the beginning of FY26, among the highest levels on record. These approvals are expected to translate into meaningful order awards across segments from the second half of FY27 onwards.
Key projects to watch include the P75(I) submarine programme, QRSAM, MRSAM, and VL-SRSAM missile systems, as well as radar and anti-drone projects.
The commencement of Tejas Mk-1A deliveries could also emerge as an important catalyst for the sector. However, the timing of large order awards and execution will remain crucial to growth in the coming quarters.
Which defence stocks does ICICI Securities prefer?
HAL, BEL and Azad Engineering remain the brokerage’s preferred picks in the defence sector, with opportunities spanning aerospace and defence procurement.
Aerospace-related segments, including missiles, interceptors, drones, radars and munitions, are expected to benefit from the changing nature of warfare and evolving procurement priorities.
While near-term performance is likely to vary across companies, stronger execution by select private players could help them outperform PSU peers in Q2 FY27. Investors will be watching quarterly execution, margin trends, order book replenishment, and the conversion of government approvals into actual contracts.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
