Meta Description:
Discover the top 3 defence stocks in India — HAL, Mazagon Dock, and Solar Industries. These companies have the largest order books, strong margins, and long-term revenue visibility under India’s growing defence budget.
3 Defence Stocks with Biggest Order Book and Highest Margins
India’s defence sector is entering a golden era. The FY2026 defence budget stands at ₹6.81 lakh crore, about 1.9% of GDP, with ₹1.8 lakh crore (26%) allocated to capital modernization. This shows the government’s push for self-reliance and modernization in aerospace, naval, and defence technology.
Domestic defence production also hit a record ₹1.51 lakh crore in FY2025, while exports crossed ₹23,622 crore, making India a rising force in global defence markets. On the investment side, the Nifty India Defence Index delivered a massive 60% CAGR in the past three years, proving the sector’s potential for wealth creation.
India defense stocks analysis
In this blog, we’ll analyze three leading Indian defence stocks — Hindustan Aeronautics (HAL), Mazagon Dock Shipbuilders (MDL), and Solar Industries India (SIL) — all of which boast strong order books, solid margins, and robust growth visibility.
Hindustan Aeronautics (HAL): India’s Aerospace Powerhouse
HAL has emerged as the largest player in India’s aerospace and defense ecosystem.
- Order Book Growth: HAL’s order book nearly doubled from ₹94,000 crore in FY24 to ₹1.84 lakh crore in FY25, giving it an impressive 6.1x order book-to-sales ratio.
- Strong Margins: Operating margins stood at 31%, well above sector averages.
- Valuation: Order book is nearly 57x of market cap, signaling strong long-term visibility.
Q1 FY26 Highlights:
- Revenue up 10.8% YoY to ₹4,819 crore.
- Expenses rose just 5.3%, driving operating profit growth of 29% to ₹1,282 crore.
- OPM improved 381 bps to 26.6%.
- Net profit slipped 3.7% to ₹13,384 crore, largely because other income (interest & refunds) forms a significant portion of earnings.
Structural Shifts:
HAL is transitioning from repair & overhaul (historically 70% of revenue) to manufacturing, which now contributes 90% of the order book. New projects such as:
- 156 LCH Prachanda helicopters worth ₹62,700 crore
- Tejas Mk 1A fighter jets
These ensure revenue visibility well into FY2031.
Risks:
- Supply chain delays, especially engine supplies impacted by the Russia-Ukraine conflict.
- Long cash conversion cycle, which worsened from 484 days in FY24 to 634 days in FY25, driven by inventory buildup.
MDL, India’s oldest and only Navratna status shipyard, is a critical strategic player building submarines and warships.
- Order Book: Declined from ₹38,755 crore in FY23 to ₹32,260 crore in FY25 due to contract execution and lower inflows.
- Sales Growth: Delivered 26% CAGR over three years.
- Margins: OPM improved from 6% (FY21) to 18% (FY25).
Q1 FY26 Highlights:
- Revenue rose 11.5% YoY to ₹2,626 crore.
- Expenses surged 35.5%, driven by higher project-related costs.
- OPM fell to 11.5%; net profit declined 35.1% YoY to ₹452 crore.
Growth Drivers:
- Future order pipeline could exceed ₹1.25 lakh crore, with P75 and P75I submarine projects being game changers.
- Acquisition of 51% stake in Colombo Dockyards (Sri Lanka), MDL’s first international venture.
Risks:
- Cost escalations from subcontracting work.
- Execution delays in mega projects like the P75I submarine, with first delivery only expected post-2032.
- High provisioning (₹532 crore in FY25) for loss-making orders.
Solar Industries India (SIL): Explosives and Beyond
Solar Industries has transformed from an explosives maker into a defense technology innovator, producing high-energy materials, initiators, and UAV systems.
- Order Book: ~₹16,800 crore in FY25 (2.25x FY25 revenue), with ₹15,000 crore from defense alone.
- Revenue Mix: Significant international exposure — over ₹8,000 crore order book from overseas markets.
- Growth: Sales CAGR of 24%, Profit CAGR of 42% over three years.
Q1 FY26 Highlights:
- Revenue up 27.8% YoY to ₹1,540 crore.
- Defense segment revenue doubled to ₹480 crore.
- OPM slipped 181 bps to 24.8% due to rising costs.
- Net profit up 17.3% YoY to ₹353 crore.
Key Growth Drivers:
- R&D success with weapons like Bhagyavastra and Rudrastra.
- ₹2,000 crore UAV tenders in the pipeline.
- FY26 revenue guidance of ₹10,000 crore, with ₹3,000 crore from defense.
Risks:
- Valuation risk — trading at 115x PE, well above its 5-year median of 62x.
- Geopolitical exposure (Turkey, South Africa, etc.) and FX volatility.
- Delays in defense order execution could slow growth.
Defense Sector Outlook
India’s defense sector presents a unique long-term opportunity. With government-backed indigenization, rising exports, and sustained budgetary support, companies like HAL, MDL, and SIL have multi-year revenue visibility.
However, investors should also recognize risks:
- High dependence on government contracts.
- Delays in mega defense projects.
- Inflationary pressures impacting margins.
- Valuation premiums leaving little room for error.
Conclusion
The defense sector remains one of the strongest growth themes in India’s economy. HAL leads in aerospace, MDL is expanding in naval platforms, and Solar Industries is innovating in high-energy defense systems.
Together, they form the backbone of India’s military modernization and export potential. But while the opportunities are vast, investors must balance them with execution risks, supply-chain uncertainties, and stretched valuations.
Disclaimer: This article is for educational purposes only and should not be considered financial advice. Please consult your financial advisor before making investment decisions.
ALSO READ
Follow me on Twitter (X) or Facebook Group for Updates.
Liked our article ? Subscribe to get weekly updates