Synopsis: A defence manufacturing company doubled its profit margin from 7% to 16% in 12 months through revenue growth, cost optimization, lower finance expenses, operational efficiency, and strategic initiatives under the PLI scheme.
A defence manufacturing company has drawn investor attention after reporting a remarkable improvement in profitability over the past year. Its earnings growth highlights operational efficiency and strategic initiatives that have significantly boosted margins, attracting interest from analysts and market participants tracking performance in the defence sector.
Krishna Defence And Allied Industries Limited, with a market capitalization of Rs. 1,620.14 crore, closed at Rs. 1,084.40 per equity share, up by 3.21 percent from its previous day’s close price of Rs. 1,051.30 per equity share.
Krishna Defence and Allied Industries Limited, based in Mumbai, India, manufactures equipment for defence, security, dairy, and kitchen sectors. It operates through Defence Products and Dairy & Kitchen Equipment, offering shipbuilding steel sections, armored vehicle components, security devices, bulk milk coolers, milking machines, parlors, and cooking and storage equipment. Founded in 1996, it was formerly Krishna Allied Industries Limited.
Financials
In Q3FY26, Krishna Defence and Allied Industries Limited reported revenue of Rs. 64 crore, up 23.1 percent YoY from Rs. 52 crore in Q3FY25 and 33.3 percent QoQ from Rs. 48 crore in Q2FY26, reflecting strong order execution and growth across its defence and industrial equipment segments.
EBITDA jumped to Rs. 14 crore, a 133.3 percent YoY increase from Rs. 6 crore and a 55.6 percent QoQ rise from Rs. 9 crore, indicating improved cost management and operational efficiency. The margin expansion was supported by lower material and labour costs along with higher-value defence and dairy equipment orders.
Net profit rose sharply to Rs. 10 crore, up 150 percent YoY from Rs. 4 crore, and 11.1 percent QoQ from Rs. 9 crore in Q2FY26. The company’s strong revenue growth, better cost absorption, and disciplined financial management contributed to significant improvements in profitability both year-on-year and sequentially.
A return on equity (ROE) of about 18.6 percent and a return on capital employed (ROCE) of about 24.3 percent, and debt to equity ratio at 0 demonstrate the company’s financial position.The stock is currently trading at a P/E of 48.7x lower as compared to industry P/E of 56x.
Sharp Increase in Profit Margin
In Q3FY26, the company reported a profit margin of 15.6 percent, a significant improvement from 7.69 percent in Q3FY25, reflecting strong revenue growth and improved operational efficiency.
1. Reduction in Cost of Materials Consumed
The company significantly lowered its cost of materials consumed relative to sales, from 40.58 percent to 24.56 percent, improving gross margins. Efficient procurement and optimized usage of raw materials contributed directly to higher profitability.
2. Lower Finance Costs
Finance costs fell sharply from Rs. 21.47 lakh to Rs. 5.5 lakh, as long-term liabilities were reduced from Rs. 9 crore to Rs. 1 crore. Reduced interest payments eased the burden on the bottom line, boosting net profit.
3. Decline in Job Work and Labour Charges
Operational efficiency and cost optimization led to a 50 percent reduction in job work and labour charges, from Rs. 6.83 crore to Rs. 3.07 crore, further enhancing profit margins.
4. Revenue Growth and Better Fixed Cost Absorption
Higher revenue growth allowed the company to spread fixed costs over a larger base, indirectly increasing profitability. This operating leverage played a key role in margin expansion.
5. Strategic MoU under PLI Scheme
Krishna Defence signed a Memorandum of Understanding with the Ministry of Steel under the Production Linked Incentive (PLI) Scheme 1.2 for Specialty Steel, aimed at strengthening domestic manufacturing capabilities in the strategic sector. This initiative is expected to support high-margin projects in the future.
Strong Order Book
As of December 31, 2026, the company’s order book stands at Rs. 142.3 crore, indicating a stable and robust business pipeline, which ensures continued revenue visibility and margin sustainability.
Future Guidance
Krishna Defence & Allied Industries Limited aims to achieve 30 percent+ CAGR over the next 3 to 5 years. The company is focusing on developing new defence products to replace imports by collaborating with defence research agencies and foreign partners.
It plans to establish a new manufacturing facility for composite doors and hatches in collaboration with VABO by FY26 to enhance production capabilities and meet growing defence sector demand. Additionally, the company is investing in a dedicated defence electronics unit for designing, developing, and manufacturing solutions for the Defence and Aerospace sectors.
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 7% to 16%: How Krishna Defence and Allied Industries Doubled Its Profit margin in 12 Months appeared first on Trade Brains.