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Defence Sector: Long-term outlook remains healthy

ICICIdirect Research 31 Jul 2026 DISCLAIMER

In defence sector, a few major companies have announced results. We understand that annual numbers matter more than quarterly, as execution and margins vary quarter-to-quarter.

Bharat Electronics (BEL) reported healthy revenue growth of 25% YoY with EBITDA margin at 25% (-286 bps YoY). However, management has maintained its FY27 guidance of 15%+ revenue growth with 28%+ EBITDA margin. Order backlog remains strong at ₹72,258 crore (2.5x TTM revenue). Company is also maintaining order inflow guidance of ₹55,000+ crore in FY27E, as the large QRSAM contract is expected to be placed by Q2FY27. We remain positive on BEL with a target price of Rs 530

Data Patterns reported revenue growth of ~17% YoY with EBITDA margin of 27% (-526 bps YoY). Though the execution was slightly affected due to some delays in customer approvals, management has maintained its guidance of 20-25% revenue growth with 35%+ EBITDA margin. Order backlog stands strong at ₹2,654 crore (including ~Rs 1700 crore of orders under negotiations).

Zen Technologies also reported revenue de-growth of ~11% YoY with EBITDA margin at 27.3% (-1356 bps YoY). However, management expects a sharp pickup from Q2 onwards and guides ~45% YoY growth for full year, supported by a ~₹1,400 crore order backlog (2x TTM revenue). FY28E is expected to be even better as management guides 200% YoY jump in revenues next year. We believe that anti-drone segment will be the key growth driver for Zen considering the robust demand globally. We have maintained our target price of Rs 2170

Rossell Techsys continued its strong execution momentum with 77% YoY revenue growth with EBITDA margin at 14.4% (flattish YoY), driven by robust demand across aerospace, defence, semiconductor and space businesses. We remain positive on this considering the pick-up in execution of healthy order backlog (Rs 800 crore, 1.4x TTM revenue). Moreover, order inflow opportunities remain robust, backed by healthy backlog of global OEMs. We have a target price of Rs 1240 on Rossell Techsys 

In defence shipyards, Mazagon Dock Shipbuilders and Garden Reach Shipbuilders reported results during this week. Execution during Q1FY27 remained healthy both the companies as Mazagon Dock revenue was up ~12% YoY while GRSE revenue was up ~39% YoY. However, we believe that timely placement of large orders (like Rs 90000 crore P-75I contract for Mazagon and ~Rs 30000 crore next generation corvettes contract for GRSE) will be the key triggers for both the companies and the current order-backlog provides revenue visibility for only next 1-2 years. We prefer Mazagon and have a target price of Rs 3060

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