Paras Defence stock: Nirmal Bang cuts target price by 16%, still sees 32% upside
Paras Defence: Nirmal Bang said growth during the quarter was primarily driven by the optronics segment, which grew 31 per cent YoY and accounted for 55 per cent of total revenue.
- Jan 26, 2026,
- Updated Jan 26, 2026 8:46 AM IST
Nirmal Bang Institutional Equities in a fresh note on Paras Defence and Space Technologies Ltd said the stock has corrected 13 per cent since its January 7, 2025 results preview note and is trading at 44 times FY27 earnings per share, below its three-year average price to earnings multiple of 57 times. The domestic brokerage maintained its 'Buy' rating on the stock post the defence company's December quarter results, but cut its target price by 16 per cent to Rs 820 from Rs 976, implying a 32 per cent upside.
The defence manufacturer reported year-on-year growth in revenue, Ebitda and PAT of 24 per cent, 19 per cent and 21 per cent respectively for the December quarter. Revenue came in at Rs 106.40 crore, Ebitda at Rs 26.20 crore and PAT at Rs 18.20 crore. The performance was lower than the Nirmal Bang's estimates of Rs 124.40 crore for revenue, Rs 35 crore for Ebitda and Rs 24.10 crore for PAT.
The brokerage said the Ebitda margin declined to 24.7 per cent in Q3FY26 from 25.7 per cent in Q3FY25, primarily due to a 93 per cent increase in raw material costs, led by the execution of extremely low margin defence engineering orders. It added that the company recognised a one-time incremental gratuity impact of Rs 1.74 crore under employee benefit expenses for the quarter and nine months ended December 31, 2025, following the consolidation of 29 labour legislations into four Labour Codes by the Government of India effective November 21, 2025.
Nirmal Bang said growth during the quarter was primarily driven by the optronics segment, which grew 31 per cent YoY and accounted for 55 per cent of total revenue. The defence engineering segment grew 16 per cent YoY and contributed the remaining 45 per cent of revenue. While the optronics segment continued to deliver strong profitability with an Ebitda margin of 57 per cent, the defence engineering segment underperformed, reporting an Ebitda margin of 2 per cent.
Nirmal Bang said the management had guided that the current revenue mix of optronics and defence engineering, which stood at 40 per cent and 60 per cent respectively, was expected to gradually shift to 60 per cent and 40 per cent as the optronics segment scaled up further, which would result in higher margins going ahead.
On guidance, Nirmal Bang said the company maintained its outlook of 35-40 per cent revenue growth and around 27 per cent Ebitda margins in FY26. The brokerage said it believed the company may fall short of its guidance and added that it intended to host the management to seek further clarity on revenue visibility.
It noted that the order book stood at around Rs 1,000 crore as of December 2025, with an order pipeline of Rs 2,000 to Rs 3,000 crore over the next 18 to 24 months. It added that the management did not conduct conference calls regularly and that the guidance provided in December 2025 had been retained.
Nirmal Bang said it expects revenue, Ebitda and PAT to grow at a compound annual growth rate of 31 per cent, 33 per cent and 34 per cent respectively over FY25 to FY27E.
Nirmal Bang Institutional Equities in a fresh note on Paras Defence and Space Technologies Ltd said the stock has corrected 13 per cent since its January 7, 2025 results preview note and is trading at 44 times FY27 earnings per share, below its three-year average price to earnings multiple of 57 times. The domestic brokerage maintained its 'Buy' rating on the stock post the defence company's December quarter results, but cut its target price by 16 per cent to Rs 820 from Rs 976, implying a 32 per cent upside.
The defence manufacturer reported year-on-year growth in revenue, Ebitda and PAT of 24 per cent, 19 per cent and 21 per cent respectively for the December quarter. Revenue came in at Rs 106.40 crore, Ebitda at Rs 26.20 crore and PAT at Rs 18.20 crore. The performance was lower than the Nirmal Bang's estimates of Rs 124.40 crore for revenue, Rs 35 crore for Ebitda and Rs 24.10 crore for PAT.
The brokerage said the Ebitda margin declined to 24.7 per cent in Q3FY26 from 25.7 per cent in Q3FY25, primarily due to a 93 per cent increase in raw material costs, led by the execution of extremely low margin defence engineering orders. It added that the company recognised a one-time incremental gratuity impact of Rs 1.74 crore under employee benefit expenses for the quarter and nine months ended December 31, 2025, following the consolidation of 29 labour legislations into four Labour Codes by the Government of India effective November 21, 2025.
Nirmal Bang said growth during the quarter was primarily driven by the optronics segment, which grew 31 per cent YoY and accounted for 55 per cent of total revenue. The defence engineering segment grew 16 per cent YoY and contributed the remaining 45 per cent of revenue. While the optronics segment continued to deliver strong profitability with an Ebitda margin of 57 per cent, the defence engineering segment underperformed, reporting an Ebitda margin of 2 per cent.
Nirmal Bang said the management had guided that the current revenue mix of optronics and defence engineering, which stood at 40 per cent and 60 per cent respectively, was expected to gradually shift to 60 per cent and 40 per cent as the optronics segment scaled up further, which would result in higher margins going ahead.
On guidance, Nirmal Bang said the company maintained its outlook of 35-40 per cent revenue growth and around 27 per cent Ebitda margins in FY26. The brokerage said it believed the company may fall short of its guidance and added that it intended to host the management to seek further clarity on revenue visibility.
It noted that the order book stood at around Rs 1,000 crore as of December 2025, with an order pipeline of Rs 2,000 to Rs 3,000 crore over the next 18 to 24 months. It added that the management did not conduct conference calls regularly and that the guidance provided in December 2025 had been retained.
Nirmal Bang said it expects revenue, Ebitda and PAT to grow at a compound annual growth rate of 31 per cent, 33 per cent and 34 per cent respectively over FY25 to FY27E.