After a quiet showing in the first quarter of the financial year ending March 2025, defence companies will be looking to rev up their earnings this quarter.

What To Expect: In their preview note on the sector, analysts at Antique Broking expect the defence companies to see decent growth and margin expansion. While some supply chain disruptions were felt due to geopolitical factors, earnings are likely to normalise in FY25, which should improve execution and revenue recognition for these companies, the analysts said.

For the second quarter, Antique Broking expects the firm’s in its coverage universe to clock a 12.5% year-on-year revenue growth, reflecting improvements in the supply chain and faster execution backed by a robust order book.

The following table includes the year-over-year sales change in percentages, giving a clear comparison between September 2023 and September 2024 in terms of both sales and profit after tax for each company.

Shipyard companies are likely to witness margin expansion and changes in revenue mix and margin dynamics are expected for players such as Bharat Electronics Limited (BEL) with a 265 basis points year-on-year decline, Hindustan Aeronautics Limited (HAL) with an 87 basis point increase, according to the brokerage.

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This will result in a 46 basis points overall EBITDA margin expansion to 21.7% for the sector, the brokerage said. Additionally, the brokerage expects a 13% increase in profit before tax and a 12% rise in profit after tax is expected for the quarter.

The brokerage expects Bharat Dynamics Limited (BDL) to see a sales growth of 14% to ₹701.5 crore. BEL’s revenue is projected to increase 18%, reaching ₹4,712.1 crore. The brokerage expects HAL to sales’ climb 10% to ₹6,199.4 crore and EBITDA to jump 14%.

It estimates Cochin Shipyard‘s sales to go up 5% to ₹1,101.9 crore while Mazagon Dock Shipbuilders‘ revenue is seen at ₹2,101.9 crore, up 15%. It sees Garden Reach Shipbuilders’ revenue growing 3% to ₹924.9 crore.

The defence sector is currently experiencing a favourable environment, benefiting from the government’s push for defence indigenization through initiatives like “Make in India” and Atmanirbhar Bharat.

This has resulted in a healthy flow of orders, with several large-scale contracts being finalised throughout the year, further strengthening the order books of defence companies and setting the stage for strong performance in FY25, the analysts added.

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