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Defence Sector Q4FY26 & FY26 preview: overall execution remains healthy

ICICIdirect Research 17 Apr 2026 DISCLAIMER
Q4FY26 is expected to a mixed bag for defence companies. Considering the FY26 provisional numbers reported by the PSUs, their aggregate growth is estimated at ~1% YoY in Q4FY26 as compared to aggregate growth of ~34% YoY from private players during the quarter.
 
However, we believe that full year numbers matter more than quarterly numbers as execution remain uneven on quarterly basis. We estimate aggregate FY26 revenue growth at ~10% for PSUs while private players growth to outpace at ~27% YoY.
 
Profitability trend also remains healthy on full year basis considering the improvement in execution and increasing indigenisation levels across platforms. We estimate aggregate PAT growth at ~11% for FY26, mainly led by ~35% PAT growth in private players driven by better operating leverage
 
Overall, defence sector outlook remains robust considering the large requirement of modern platforms & systems, govt’s strong focus on increasing indigenisation and faster procurement of these equipment’s. Aggregate order backlog (including both PSUs and private players) stands at ~5x of FY26E revenue, providing healthy growth visibility in the medium term
 
Stocks Preferred – Bharat Electronics, HAL, Astra Microwave

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