Defence stock to buy now for an upside of 41%; Do you own it?

Synopsis:- The brokerage sees strong upside driven by a 41% target premium, expected 36.5% revenue CAGR and expanding margins by FY28. Despite muted 2% revenue growth and an 11% profit dip, a  Rs 1,048 million order book and long-term  Rs 1,000 crore FY29  revenue ambition support resilient growth visibility.

India’s aerospace and defence sector is rapidly expanding, valued at around USD 30 billion in 2025 with a projected growth rate of over 7% CAGR. The government’s strict focus on domestic sourcing, with 75% of modernisation budgets dedicated to local manufacturing, is boosting the sector. Defence approvals reached Rs 2.5 trillion in FY26, supporting robust investments across military aviation and indigenous production.

With a market capitalisation of Rs 4,956.00 crore, the shares of Unimech Aerospace and Manufacturing Ltd were trading at Rs 974.50 per share, increased around 0.21 percent as compared to the previous closing price of Rs 972.50 apiece.

Brokerage Recommendation

Anand Rathi has initiated a ‘Buy’ on the aerospace stock with a target price of Rs 1,375, implying a 41% upside from the Wednesday price of Rs 974.5 apiece. The call reflects confidence in earnings recovery, improving demand outlook, and operating leverage benefits from rising capacity utilisation.

Anand Rathi noted that despite a 12.2% beat on ARe (Anand Rathi Estimates), Unimech reported flattish revenue due to tariff-related headwinds. Near-term ordering remains muted, which could soften FY26 growth, even as execution remains stable across core aerospace tooling operations.

Looking ahead, Anand Rathi expects 36.5% revenue CAGR over FY25–28, driven by aero-tooling scale-up and diversification into nuclear, semiconductor, and defence PCA. EBITDA margins are projected to revert to FY25 levels by FY28, while PAT is seen growing 27% CAGR with RoIC rising 812 bps to 40.1%, supporting premium valuations.

Financial highlights & Outlook

The company posted muted revenue growth of 2%, with Q2FY26 sales inching up to Rs 62 crore from Rs 61 crore a year earlier. However, profitability declined, as net profit fell 11% to Rs 16 crore from Rs 18 crore, indicating margin pressure despite stable topline performance.

Unimech Aerospace and Manufacturing strengthened its growth visibility with Rs  350 million worth of new GSE orders added during the quarter. This lifted the company’s total order book to Rs  1,048 million by the first week of November 2025, reflecting strong traction across diversified customer segments.

Management has withdrawn its earlier 40% FY26 growth guidance, stating it is no longer practical under current conditions. The company now aims to deliver higher revenue than last year but with lower margins. With H1 EBITDA at around 30%, a further sales slowdown could compress margins by 2–3 percentage points.

The near-term outlook remains soft, with Q3 and Q4 expected to stay weak, and meaningful strength likely only in the final quarter. Strategically, the FY29 revenue target of Rs 1,000 crore remains intact, with a planned 65:35 mix between aero tooling and nuclear/precision, plus a geographic shift beyond the US toward the Middle East.

Unimech Aerospace is a fast-growing engineering company focused on precision aerospace tooling, ground support equipment and high-end manufacturing solutions. Serving global customers across aerospace, defence and advanced manufacturing, the company is steadily scaling capacity, diversifying its order base and expanding into new-age segments such as nuclear and semiconductors.

Written by Abhishek Singh

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