HAL, BEL, Ideaforge, Data Patterns: Top defence stocks to buy; check targets & key expectations

JM Financial expects Hindustan Aeronautics Ltd (HAL) to lead revenue growth among the defence companies under its coverage in the second quarter of FY27. HAL's revenue is projected to rise 22 per cent year-on-year (YoY), supported by deliveries of LCA FOC Mk1, HTT trainer aircraft and Dhruv NG helicopters.

Other covered companies are expected to report execution in line with typical quarterly trends, with the second quarter accounting for 19-20 per cent of annual execution. Operating leverage could improve their EBITDA margins sequentially, while HAL's margins may face pressure from a higher share of manufacturing revenue.

HAL: Tejas Mk1A deliveries in focus
JM Financial expects HAL's aircraft and helicopter deliveries in September 2026 to drive its revenue growth. However, the higher contribution from manufacturing revenue is likely to weaken its gross margin and compress its EBITDA margin quarter-on-quarter (QoQ).

Tejas Mk1A deliveries remain a key factor to monitor. Engine supply constraints appear to have largely eased, with 14 engines supplied so far, while progress on resolving technical integration issues will be watched. The Indian Air Force and HAL are expected to review deliveries in mid-October 2026. Potential near-term orders are another monitorable.

BEL: Revenue may rise 10 per cent
JM Financial estimates Bharat Electronics Ltd (BEL) revenue will grow 10 per cent YoY. Its gross margin is expected to remain stable sequentially, while operating leverage could lift its EBITDA margin.

BEL may record order inflows of Rs 3,100 crore in Q2FY27. Along with Rs 3,750 crore in Q1FY27, this would equal 27 per cent of the management's annual guidance of Rs 25,000 crore, excluding the Quick Reaction Surface-to-Air Missile order. Updates on the potential QRSAM order timeline will be closely tracked.

Data Patterns: Revenue pegged at Rs 230 crore 
Data Patterns' revenue is estimated at Rs 230 crore, down 27 per cent YoY because Q2FY26 benefited from a large order execution. Conversion of its order pipeline into inflows will be the main monitorable.

Ideaforge: Revenue seen at Rs 120 crore 
JM Financial estimates Ideaforge's Q2FY27 revenue at Rs 120 crore, in line with management guidance to execute its outstanding FY26-end order book by Q3FY27. Its order inflow outlook will be watched.

HAL is expected to record the strongest revenue growth, despite margin pressure. Attention will also remain on BEL's QRSAM order, Data Patterns' order conversions and Ideaforge's order inflows. From the defence pack, it has a 'buy' rating on BEL with a target price of Rs 485. It has an 'add' rating on HAL (Target Price: Rs 5,210), Ideaforge Technology Ltd (Target Price: Rs 905) and Data Patterns (Target Price: Rs 4,660).