Nirmal Bang has downgraded the Defence sector to “SELL,” citing super rich valuations driven by strong order books. The firm argues that current valuations are not reflective of the industry’s true value, given its cyclicality, profitability, and efficiency.
Nirmal Bang remains structurally positive on the Defence sector but highlights several risks not accounted for in the current valuations. These include execution hiccups, rising raw material costs, competitive pressures, and challenges in cash flow generation.
Despite projecting strong earnings growth, the firm estimates a return on equity (ROE) of approximately 10-30% for FY26. Nirmal Bang prefers to remain on the sidelines until valuations return to more reasonable levels.
