Q2FY26: Defence Players Deliver Strong Quarter as BEL, HAL and GRSE Lead Growth

India’s defence sector posted a strong Q2FY26 performance, with major public-sector companies reporting healthy execution and maintaining full-year guidance. The quarter was broadly in line with expectations, supported by a robust order pipeline and stronger delivery momentum.

Large PSUs like BEL, HAL, GRSE and MDL delivered impressive numbers, helping offset weaker performance from companies such as Cochin Shipyard. Analysts expect the second half of the year to be significantly stronger as execution accelerates.

BEL, HAL and GRSE Shine in Q2FY26

Bharat Electronics Ltd (BEL) remained one of the biggest outperformers.

• BEL reported 28% revenue growth, supported by strong execution and higher-than-expected margins.

• BEL’s H1 revenue grew 16%, while EBITDA rose 26%, with margins at 28.5–29%.

• Management commentary stayed confident, especially regarding the Rs 30,000-crore QRSAM order and a strong Rs 74,000-crore order book.

Hindustan Aeronautics Ltd (HAL) also recorded a stable quarter:

• Revenue grew around 11%, despite major LCA deliveries scheduled only for Q4.

• Margins saw typical quarterly variability due to provisioning.

• Analysts expect margins to rise to 27–28% for the full year as execution picks up.

Also Read: Tata Motors PV Shares Crash 6% After Weak Q2, JLR Guidance Cut

Mixed Performance Across Other PSUs

Performance varied across the broader PSU space:

• BEML posted a subdued quarter, with defence contributing just 27% to revenue as execution lagged.

• GRSE delivered one of the strongest quarters, with:

  • 45% execution growth

  • 127% surge in EBITDA

  • 330 bps margin expansion

• MDL also delivered healthy execution and positive commentary.

• Cochin Shipyard disappointed with a 12% decline in shipbuilding revenue to around Rs 760 crore due to execution and supply chain delays.

Private Players Show Mixed Trends

Private defence companies had uneven performance:

• Data Patterns recorded strong triple-digit growth.

• Astra Microwave remained soft due to customer delays.

• Paras Defence and other midcaps delivered mixed results.

• Bharat Dynamics Ltd (BDL) stood out with:

  • 90% H1 revenue growth

  • Margin expansion from 6.3% to 10.2%

  • PAT rising to around Rs 234 crore from Rs 129 crore.

Demand Strong; Order Inflows Expected to Pick Up

Analysts highlighted that order books remain healthy across defence companies.

• BEL has already recorded Rs 16,000–17,000 crore in order inflows and expects another Rs 27,000 crore from the QRSAM order.

• Ministry approvals in the last 12 months exceeded Rs 2.5 lakh crore, indicating a robust outlook for defence demand.

Order inflows were slower in Q2, but analysts expect a sharp pick-up starting late November, driven by emergency procurement orders.

Execution to Accelerate in H2

Industry commentary consistently points to strong H2 performance:

• H1 is usually weaker, with 50–60% of annual revenue booked in the second half.

• Analysts maintain full-year expectations due to solid execution visibility.

• Companies such as HAL, BDL, BEL and Solar Industries reported strong manufacturing or defence revenue growth in Q2.

Expected growth outlook:

• HAL: mid-single-digit growth

• BDL: 35%+ growth

• BEL: ~20% growth

• Momentum likely to extend into FY27 and FY28

Valuations High but Stable

Valuations remain elevated but have stabilised following recent corrections:

• BEL: 46x earnings, 11.7x book

• HAL: 32x earnings, 7.1x book

• GRSE / MDL: around 35x

• Cochin Shipyard / BDL: above 45x

• Data Patterns: 53x, MTAR: 61x, Solar: 62x, Paras Defence: 52x

Analysts believe HAL appears most favourable over the next 6–9 months due to a strong earnings trajectory, while BEL and BDL trade at around 40x FY28 earnings.

Outlook: Stronger Q3 and Q4 Ahead

As the sector moves into its seasonally stronger half, analysts expect:

• Acceleration in execution in Q3 and Q4

• Stronger deliveries

• Boost from emergency procurement orders

• Continued stable visibility from strong order books

The defence sector is positioned for a robust finish to FY26, supported by healthy demand, solid manufacturing execution, and strong order flows.
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