Semiconductor Stock with 25% Margin Growth Guidance in Defence Systems to Look Out For

Synopsis:- The defence electronics firm is strengthening its pipeline with a ₹700 crore airborne radar program and a ₹30 crore air navigation order, while targeting $10 million semiconductor EMS revenue in FY26. Management expects 20–25% margins in defence systems and 10–11% in EMS manufacturing.

India’s defence sector is surging ahead with record momentum in FY26. The Union Budget allocates ₹7.85 lakh crore to the Ministry of Defence, including ₹2.19 lakh crore for capital modernisation, a 21.84% hike, to boost aircraft, weapons, and infrastructure. Production targets exceed ₹1.75 lakh crore, while exports hit ₹25,800 crore, up 207% from FY21, driving self-reliance.

With a market capitalisation of Rs 4,182.90 crore, the shares of Centum Electronics Ltd closed at Rs 2,837.60 per share, increased around 2.07 percent as compared to the previous closing price of Rs 2,780.15 apiece.

EMS Expansion

The company’s India operations continued to gain momentum, led by strong execution in its high-margin Build-to-Spec (BTS) segment. Key programs include radar systems, space-based electronic warfare, and tank electronics. Management highlighted that BTS projects typically follow a milestone-driven execution cycle of about 2–2.5 years, leading to periodic revenue lumpiness but strong long-term demand visibility.

Meanwhile, the EMS business is expanding with a new semiconductor equipment customer already beginning serial deliveries. Management expects this segment to generate at least $10 million in FY26 and scale to around $30 million annually in two years. Additionally, the company has begun capacity expansion at KIADB Aerospace Park to strengthen system integration capabilities.

Defence Pipeline Expansion

Centum Electronics has strengthened its defence pipeline after being declared L1 for developing a complete airborne radar system worth around ₹700 crore, expected to be executed over 5–6 years. Additionally, the company partnered with GRSE for mission-critical air navigation systems, with the first order of about ₹30 crore already secured.

Moreover, the company is expanding into mission-critical defence and space technologies through new strategic programs. The company partnered with GRSE for advanced air navigation systems, securing an initial order of about ₹30 crore, with a potential opportunity of nearly ₹500 crore over the next 3–5 years. Additionally, it sees a ₹1,000 crore opportunity in space-based surveillance payload electronics.

Financial & other Highlights

The company reported steady growth in its consolidated performance from continuing operations. In Q3 FY26, revenue rose 21% year-on-year to ₹331 crore, while EBITDA stood at ₹31 crore with a margin of 9.5%. Profit before tax increased 53% YoY to ₹18 crore. For the nine-month period, revenue reached ₹873 crore with improved profitability and margins.

Management indicated a strong margin outlook driven by its high-value defence and systems programs. The Build-to-Spec defence segment is expected to deliver EBITDA margins of around 20–25%. Meanwhile, the EMS manufacturing business is likely to maintain margins near 10–11%. With standalone margins already expanding by about 200 basis points in 9M, management expects further improvement going forward.

Centum Electronics Ltd is an Indian ESDM (Electronics System Design and Manufacturing) technology company specializing in aerospace, defence, and industrial electronics. The company designs and manufactures mission-critical electronic systems, including radar, avionics, and space electronics. It also provides electronic manufacturing services (EMS) for global customers, focusing on high-reliability solutions used in defence, space, and semiconductor equipment.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Semiconductor Stock with 25% Margin Growth Guidance in Defence Systems to Look Out For appeared first on Trade Brains.