Bharat Dynamics Q2 Results: Shares tumble 4% after weak earnings; operating profit falls 57%

Detailed summary

Going ahead, investors will track updates on fresh order inflows, particularly for the Akash-NG and Quick Reaction Surface-to-Air Missile (QRSAM) programmes. Progress on these projects and the company's ability to improve margins as execution scales up will remain important monitorables.

Shares of Bharat Dynamics Ltd. (BDL) declined as much as 4% on Thursday, November 12, after the defence company reported a weak set of September quarter results, with profitability declining sharply despite healthy revenue growth.

The company's consolidated net profit fell 15% year-on-year to ₹183.5 crore in Q2FY27, compared with the corresponding quarter last year.

However, revenue from operations increased 43.3% year-on-year to ₹1,644 crore, outperforming expectations. The topline growth came against analyst expectations of a 17% year-on-year decline in revenue.

On a sequential basis, revenue surged nearly 1.9 times, potentially reflecting an improvement in execution across key programmes, including the Akash and Astra Mk-1 projects.

Despite the strong revenue performance, operating profitability came under considerable pressure. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) declined 57% year-on-year to ₹81 crore.

Gross margin contracted sharply to 20% from 43% in the corresponding quarter last year. EBITDA margin also declined by approximately 1,110 basis points to 4.9%, compared with 16% a year ago.

The EBITDA margin was also significantly below the estimated 16%, highlighting the extent of the operating margin pressure.

The sharp deterioration in margins is likely to have been driven by a higher proportion of bought-out components, particularly critical components required for the Akash and Astra Mk-1 platforms. This appears to have weighed on profitability despite the strong pickup in revenue.

For the first half of FY27, BDL reported a 60% year-on-year increase in revenue to ₹2,236 crore from ₹1,395 crore.

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