Bharat Dynamics shares extend losses after Q3 results despite higher defence capex

Shares of Bharat Dynamics declined 6% on Monday, February 2, extending weakness across defence stocks, with 16 of the 18 constituents of the Nifty Defence index trading in the red.

The decline comes as brokerages point to the lack of major policy announcements for the sector in the Union Budget, even though the government raised defence capital expenditure.

Analysts said the absence of any "big bang" reforms weighed on near-term sentiment, triggering profit-taking across defence names.

That said, brokerages remain constructive on the medium-term outlook, citing that higher capital spending should continue to support order inflows.

The Union Budget has raised core defence capital expenditure by 18% year-on-year for FY27, while the total defence outlay now stands at ₹7.6 lakh crore, up 7% from the revised estimate.

Nomura said the Budget fell short of transformative measures but added that the increase in capital allocation is a positive for the sector.

Goldman Sachs said in its note that FY27 defence spending has come in ahead of its estimates. The brokerage pointed to a sharp rise in allocations within capital procurement, with spending on 'Other Equipment', which includes missiles, ammunition and radar electronics, up 62% to ₹82,200 crore.

It added that Bharat Dynamics is well positioned to benefit from this spending focus.

Bharat Dynamics is also among the top picks of Harshit Kapadia of Elara Securities.

The stock's decline follows weak quarterly earnings.

Bharat Dynamics reported its Q3 results on January 31, with net profit falling 50.3% year-on-year to ₹73 crore. Revenue declined 32% to ₹566.6 crore.

The company's EBITDA dropped sharply by 79.5% to ₹26 crore, while EBITDA margin narrowed to 4.6% from 15.3% a year ago.