Defence stock to buy: Ashika picks pure-play drone maker, sees 27% upside

Ashika Institutional Equities has initiated coverage on drone sector, with a 'Buy' rating on Ideaforge Technology Ltd and a target price that suggested 27 per cent potential upside. Ashika said Ideaforge's FY26 recovery, revenue up 40 per cent and gross margin rebounding to 58 per cent, confirms that FY25 was a timing disruption, not a structural break, and that a fully covered orderbook underpins the FY27 ramp-up.

Ashika said the investment case in IdeaForge is fundamentally an operating leverage story.

"Fixed employee costs and other expenses not growing as much as revenue nearly doubling each year will drive Ebitda margin from 2 per cent to 29 per cent over two years. We initiate with a BUY and a target price (TP) of Rs 942, valuing the company at 32 times PE on FY28E EPS of Rs 29.40," Ashika said.

The domestic brokerage said Ideaforge's valuation multiple is supported by a sub-1 PEG, a conservative positioning within the 30–65 times PE multiple of peer band, and a “scarcity premium” as India's sole listed pure-play drone manufacturer.

First Forge and Yeti remain unmodelled upside potential, skewing the risk-reward materially in the investor's favour, it said.

Ideaforge Technology is India's largest homegrown drone manufacturer. The company builds Unmanned Aerial Vehicles (UAVs) primarily for government customers, both defence and civil. On the defence side, which accounts for 69 per cent of revenues (FY26), it supplies drones to the Indian Army and paramilitary and police forces,
used mainly for border surveillance, reconnaissance, and law enforcement.

The remaining revenues come from civil applications such as land surveying, infrastructure inspection, and disaster response, where its drones are deployed by agencies like the Survey of India.

"The company has already passed customer acceptance testing in live contested environments, making it the only Indian OEM with a field-validated, inductable EW stack. Orders worth over Rs 100 crore for ZOLT and SWITCH were won in Q3FY26 specifically based on this capability," Ashika said.

Ashika noted that Ideaforge secured its first US commercial order, a pilot deployment of NDAA-compliant SWITCH and Q6 V3 UAVs for Lamar CISD Police Department, Texas, covering 20–25 schools. It also trained NATO military personnel at the US National Test Pilot School and demonstrated its platforms to the US DoD customers in extreme cold weather conditions in Alaska.

"Q4FY26 delivered the highest-ever quarterly revenue and the first positive PAT quarter. Post-QIP, the company moved to a net cash position with working capital fully funded — removing the key balance sheet constraint on scaling. PAT break-even on a full-year basis is achievable at Rs 300–400 crore revenue at current gross margin," Ashika said.