Choice Institutional Equities has turned upbeat on India’s defence sector in its Q2 FY26 preview; the brokerage said that it remains structurally positive on the country’s defence ecosystem.
The brokerage said factors like indigenisation, faster procurement, and export tailwinds are lifting visibility for domestic suppliers.
Choice pointed to policy and order flows as the key growth engines. It highlighted that exports have surpassed Rs 23,622 crore in FY25, with the government targeting Rs 50,000 crore by 2029. Major domestic programmes, including the Cabinet’s approval of a Rs 62,370 crore contract for 97 LCA Mk-1A aircraft, are underpinning multi-year revenue streams for large-cap companies and their supply chains, it added.
Choice identified Bharat Electronics (BEL), Bharat Dynamics (BDL), and Data Patterns as its high-conviction picks. “We maintain a positive stance on BEL, BDL and Data Pattern, which are expected to deliver strong growth in Q2FY26,” it noted.
The brokerage has ‘Buy’ ratings on several defence stocks. For Bharat Dynamics, it has a target price of Rs 1,965. For Bharat Electronics, the target is Rs 500. It has a target of Rs 5,570 for Hindustan Aeronautics (HAL), Rs 2,150 for Zen Technologies, and Rs 3,100 for Data Patterns.
Here is a stock-specific outlook from the brokerage:
Bharat Dynamics: Choice expects a sharp ramp-up for BDL in the second quarter, forecasting revenue of Rs 757.9 crore. This represents a year-on-year (YoY) growth of roughly 30-35 per cent, driven by missile programmes like Akash, ATGM, and QRSAM. The brokerage said margins should expand meaningfully, likely reaching the low-20s in percentage terms, and forecast a Profit After Tax (PAT) of about Rs 158.2 crore.
Bharat Electronics: BEL is projected to deliver a strong quarter with revenue of around Rs 5,609.4 crore, up approximately 26 per cent quarter-on-quarter (QoQ) and 22 per cent YoY. However, Choice expects a small dip in margin to about 26.5 per cent due to product mix and material costs. PAT is estimated to be near Rs 1,146.4 crore.
Hindustan Aeronautics (HAL): Choice projects an accelerated delivery schedule for HAL, with Q2 revenue seen at around Rs 6,564 crore, up about 36 per cent QoQ and 10 per cent YoY. Key operational watchpoints include the execution of ongoing aircraft programmes and the timely delivery of GE engines for the Tejas programme, the note said.
Data Patterns: The specialist systems supplier is expected to post robust results. Revenue is estimated at around Rs 137.2 crore, up 38 per cent QoQ and 51 per cent YoY, with margins expanding to about 35 per cent. Choice forecasts a PAT of Rs 38.8 crore and pointed to opportunities in Electronic Warfare (EW) systems and BrahMos as key triggers.
Zen Technologies: Choice models a steady quarter for Zen, with revenue projected at Rs 174 crore (up 10 per cent QoQ, but down 28 per cent YoY). A moderation in margin is attributed to shifts in the product mix. The brokerage also flagged the potential for a major order inflow in the second half of FY26.
However, the brokerage tempered its optimism with a few caveats. “Deliveries hinge on customer acceptance trials,” it warned, adding that PSUs with long payment terms can strain cash conversion. Choice also flagged supply chain risks, such as the pricing of rare metals, which could potentially slow the fulfilment of some programmes.
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