Bharat Electronics Q2 FY26 Results: 26% Revenue Growth; Is This Defence Stock’s Rally Sustainable?

Bharat Electronics Limited (BEL) has delivered a strong Q2 FY26 performance that underscores the Navratna defence PSU’s execution capabilities in India’s expanding military modernisation landscape. Revenue from operations surged 25.75% year-on-year to ₹5,764 crore, while profit after tax grew 17.86% to ₹1,286 crore for the quarter ended September 30, 2025.

For investors evaluating India’s defence sector, these results raise interesting questions about whether BEL can sustain this growth momentum while managing the working capital intensity and execution challenges inherent in large defence contracts.

About Bharat Electronics Limited

Bharat Electronics Limited operates as one of India’s premier defence electronics manufacturers under the Ministry of Defence. Established in 1954, the company has evolved from a single-product manufacturer to a diversified defence electronics powerhouse with capabilities spanning radars, military communication systems, electronic warfare equipment, naval systems, and avionics.

The institution maintains its registered and corporate office in Bangalore, with multiple manufacturing units across India. BEL has positioned itself as a critical technology partner to India’s armed forces while gradually expanding into civilian sectors, including homeland security, smart city infrastructure, and aerospace electronics.

The company’s order book as of October 1, 2025, stood at an impressive ₹74,453 crore—providing substantial revenue visibility and demonstrating the defence establishment’s confidence in BEL’s execution capabilities under the government’s Atmanirbhar Bharat initiative.

Bharat Electronics Q2 FY26 Results: Financial Performance

Revenue from operations for Q2 FY26 reached ₹5,763.65 crore compared to ₹4,583 crore in the corresponding quarter last year, marking a robust 25.75% year-on-year expansion. For the first half of FY26, revenue totalled ₹10,180 crore against ₹8,782 crore in H1 FY25—a 15.92% increase that reflects improving execution momentum.

Source: MoneyControl

The acceleration in quarterly growth compared to half-yearly figures suggests execution is picking up pace, though defence contracts typically follow a backend-loaded pattern with significant revenue recognition in Q3 and Q4.

Operating profit before exceptional items and tax stood at ₹1,734 crore for Q2 FY26, up 19.53% from ₹1,451 crore in the corresponding period last year. The slightly lower profit growth relative to revenue expansion indicates marginal pressure on operating leverage, primarily driven by a 17% year-on-year increase in employee benefit expenses to ₹761 crore, reflecting wage revisions and workforce expansion.

Profit After Tax (PAT) reached ₹1,286 crore for the quarter, translating to earnings per share of ₹1.76 (not annualised) compared to ₹1.49 in Q2 FY25. For the first half of FY26, PAT totalled ₹2,255 crore with EPS of ₹3.09 versus ₹1,867 crore and ₹2.55 respectively in the corresponding period last year.

Total provision for taxation stood at ₹448 crore for the quarter, with an effective tax rate remaining stable. The tax expense included adjustments for earlier years, reflecting ongoing assessments typical of long-cycle defense contracts.

Also read: Canara Bank Q2 FY26 Results: ₹4,774 Cr Profit—Can This Public Sector Lender Sustain Its Momentum?

Balance Sheet Strength and Working Capital Dynamics

The standalone balance sheet as of September 30, 2025, shows total assets of ₹42,507 crore, with shareholder equity standing at ₹21,288 crore. Cash and cash equivalents of ₹725 crore, along with other bank balances of ₹10,552 crore, provide substantial liquidity for working capital management.

However, trade receivables increased to ₹9,092 crore from ₹8,716 crore as of March 31, 2025—reflecting the typical payment lag in defence contracts but requiring continued monitoring. Inventories stood at ₹10,145 crore, up from ₹9,070 crore, indicating ongoing project execution and material procurement for the healthy order book.

The cash flow statement reveals working capital intensity typical of defence manufacturing. Operating activities resulted in a cash outflow of ₹873 lakh for H1 FY26, compared to an outflow of ₹2,307 lakh in the corresponding period last year—an improvement but still highlighting the capital demands of long-gestation defence projects.

Market Response and Outlook

Investors responded positively to the results, with BEL’s share price surging 3.98% in a single trading day following the announcement. The immediate market reaction reflects confidence in the company’s ability to convert its substantial order book into revenue while maintaining profitability despite cost pressures.

Source: Google Finance

At current trading levels, BEL commands a premium valuation relative to public sector peers, reflecting market confidence in the defence modernisation theme and the company’s dominant market position. The ₹74,453 crore order book—representing nearly 3x the current annual revenue run rate—provides strong revenue visibility extending well into FY27 and beyond.

The government’s push for import substitution under Atmanirbhar Bharat directly benefits BEL as the primary defence electronics manufacturer with proven development and manufacturing capabilities.

Risks Worth Monitoring

Several factors warrant investor attention. Customer concentration remains elevated, with the Ministry of Defence accounting for the majority of revenues, exposing BEL to defence budget allocation decisions and procurement cycle delays. Large defense projects frequently face execution challenges, timeline extensions, and penalty risks that could impact near-term profitability.

Conclusion

For investors seeking exposure to India’s defence sector, BEL’s Q2 FY26 results demonstrate the company is effectively converting its substantial order book into revenue while maintaining reasonable profitability despite cost pressures.

The substantial order book, improving execution momentum, and structural tailwinds from defence modernisation provide confidence in near-term growth sustainability. However, current valuations leave limited room for execution missteps or margin compression, making entry timing and price discipline critical for return optimisation.

Analysis based on BEL’s Q2 FY26 financial results and regulatory filings. Defence sector performance is subject to government budget allocations, geopolitical developments, and execution risks. This represents analytical perspective, not investment advice.

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