Defence stocks grabbed attention on Friday thanks to reports that the Defence Acquisitions Council is expected to give preliminary approval for three crucial projects amounting to Rs1.4 trillion at the end of this month. Ltd’s shares closed 5% up. In any case, its prospects are on a better footing now. Worries about delayed execution despite a strong order book appear to have eased to an extent. True, in the first half of FY24 (H1FY24), revenue fell by almost 26%, hurt by supply chain challenges. But in the September quarter (Q2FY24), Bharat Dynamics’ revenues grew by 15% year-on-year to Rs610 crore after three straight quarters of revenue drop. Still, it must register an 81.5% growth in the second half to meet the full-year revenue target of Rs3,200 crore. Turning tide The company doesn’t appear to be losing sleep over this. When Antique Stock Broking recently met the management of Bharat Dynamics, the company said it was confident of meeting its revenue guidance, aided by timely availability of components. Analysts are broadly optimistic. “Q4 is generally the strongest quarter for Bharat Dynamics, and it would see significant ramp-up in execution, thus aiding the company to achieve its revenue target," said Harshit Kapadia, analyst, Elara Securities (India). Further, it augurs well Bharat Dynamics’s order book was robust at Rs20,766 crore as at September-end, up 3.6% versus six months earlier. This provides revenue visibility of 9.6 times on a trailing 12-month basis. “We believe Bharat Dynamics has the ability to execute its current order book by FY27E, and considering the company is DRDO’s (Defence Research and Development Organisation) production agency, it will maintain a steady inflow of orders and growth will be uninterrupted," said Antique’s analysts. As such, so far in 2023, Bharat Dynamics shares are up 23%. The fact that it has not cut its revenue guidance has cheered investor sentiment, says Kapadia. Plus, valuations aren’t too demanding, with the stock trading at almost 23 times its FY26 estimated earnings. One must monitor the ongoing Israel war as that could delay supply of components for one of Bharat Dynamics’s key projects–medium range surface to air missile. In this backdrop, poor execution by the company and failure to meet its revenue target may throw cold water on investor hopes.