Mazagon Dock, BEL, HAL, PTC Industries: Q2 preview, defence stock picks

Antique Stock Broking in an earnings preview note said its coverage defence manufacturers may report a combined 17 per cent YoY growth in Q2, led by robust execution of order book. Operating margins for Antique's defence universe is expected to decline 160 basis points for the quarter mainly impacted by softer quarterly margins for Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), Mazagon Dock Shipbuilders Ltd and Cochin Shipyard Ltd. 

Antique expects its coverage defence universe to report 7.6 per cent YoY increase in PAT, saying QoQ growth would be stronger at 27.6 per cent. At an aggregate level, business outlook with regards to ordering and medium term prospects and supply chain issues across some companies would be the key monitorable, it said. 

Antique said India’s defence sector continued to chart a strong growth path, aided by a series of government policy measures aimed at building a self-reliant ecosystem. The brokerage highlighted that the government’s five positive indigenisation lists have played a key role in strengthening domestic capabilities. In addition, two dedicated defence corridors are being set up to boost local manufacturing, while automatic FDI approval of up to 74 per cent is expected to attract investments and help develop a critical component supply chain.

Further, 75 per cent of the defence capital procurement budget has been reserved for the domestic industry, and MSMEs along with start-ups are being actively integrated into the supply chain.

These initiatives have helped India’s domestic defence production reach Rs 1.5 lakh crore, with the government targeting over Rs 3 lakh crore by FY30. To enhance operational preparedness, the Defence Acquisition Council (DAC) aims to approve AoNs worth Rs 2 lakh crore in FY26, of which Rs 1.7 lakh crore has already been cleared. A large portion of these approvals will be sourced from domestic companies, reinforcing a strong medium-term outlook for the sector.

"In 2QFY26, we expect revenue for our coverage universe to register 17 per cent YoY growth led by robust execution of order book. Our defence universe's operating margin is expected to decline by 160 bps for the quarter, mainly impacted by softer quarterly margins for HAL, BEL, MDL and Cochin Shipyard," Antique said. 

Among individual companies, GRSE is expected to report strong profit growth of 58 per cent YoY, led by momentum in execution of P17A Frigate order. Mazagon Dock had reported softer Ebitda margin in Q4FY25 and Q1FY26, mainly due to outsized provisions. Antique expects these provisions to taper down from 2QFY26 onwards. Zen Technologies had reported a weak set of quarterly earnings in Q1FY26. Antique expects the same trend to continue in Q2FY26 as well, given that order accretion has been below expectations. Its top defence stock picks included PTC Industries, BEL, HAL and Mazagon Dock.