3 Defence Stocks Down up to 30% from Highs

Defence stocks have had a blockbuster run over the past year.

But the rally has cooled off in recent weeks.

After a period of relentless optimism driven by order wins, indigenisation tailwinds and robust institutional flows, some of the sector's top names have corrected meaningfully from their highs.

In most cases, the dip in price has come from rising costs, rich valuations, or short-term execution stumbles and not poor fundamentals.

Yet the structural story remains intact. Defence companies have growing pipeline of contracts across shipbuilding, electronics, drones and aerospace.

Here are three defence stocks that have corrected up to 30% from their peaks.

#1 Mazagon Dock Shipbuilders

Next on our list is Mazagon Dock Shipbuilders.

Mazagon Dock Shipbuilders is India's premier defence shipyard, with a strong track record of delivering submarines, destroyers and frigates for the Indian Navy. It remains a key beneficiary of India's push for self-reliance in defence manufacturing.

The stock is currently down 28% from its 52-week high, following a sharp rally in FY25 and a weaker start to the new financial year.

The correction has come on the back of disappointing financial results.

FY25 ended on a muted note with a dip in Q4 numbers and the trend extended into Q1FY26. Revenue for the June quarter rose 11.4% YoY to Rs 26 billon (bn), aided by steady deliveries of frigates and submarines.

MDL's associate, Goa Shipyard, contributed Rs 329 million (m) to the bottom line, offering a modest cushion to the earnings decline.

But the profit story was underwhelming.

Net profit fell 36% YoY to Rs 4.2 bn, hit by a steep contraction in margins. Employee costs rose 10% and procurement of base and depot spares nearly doubled, dragging down efficiency.

As a result, EBITDA margin dropped to 11.5% from 27.3% a year ago. This reflects rising cost pressures and a less favourable execution mix.

Provisions surged over Rs 5.4 bn, up from just Rs 3 lakh in the same quarter last year, significantly weighing on profitability.

Despite the margin pressure, Mazagon Dock remains a strategically important company. It ended FY25 with an order book of around Rs 322 bn.

If two mega submarine contracts, including Project-75 (Additional) and Project-75(I) are awarded, the order book could shoot up to over Rs 1.2 trillion. These deals are crucial not just for topline growth but also for lifting margins through higher-value projects.

For a stock that had a strong run in FY25, these results may trigger a pause in sentiment. The next leg of re-rating will hinge on management's guidance around provisioning, cost discipline, and execution timelines.

To know more about the company, check out its financial factsheet and latest quarterly results.

#2 Cochin Shipyard

Third on our list is Cochin Shipyard.

Cochin Shipyard is India's largest government-owned shipbuilding firm.

Once seen as a pure-play shipbuilder, it's now actively pivoting to new engines of growth like green vessels, global repairs, exports and technical alliances.

The stock is currently down 35% from its 52-week high, after rallying sharply on defence and ship repair optimism.

The recent dip likely reflects margin concerns and profit-booking after a steep run-up in FY25.

In FY25, standalone revenue rose 24% YoY to Rs 45 bn, while PAT inched up 4% to Rs 8.4 bn. Margins compressed from 31% to 26%, due to provisions. However, revenue quality improved.

In fact, ship repair revenue overtook shipbuilding, hitting Rs 18.6 bn. This mix shift speaks to a more profitable operating structure and better asset utilization.

The outlook remains bright. Two large facilities including an international ship repair hub and a new dry dock, worth over Rs 21 bn are expected to come online in FY26. These could unlock higher throughput and expand margins further.

Cochin Shipyard has also been active on the global stage. It's inked partnerships with Dubai's Drydocks World for ship repair clusters and Korea's HD KSOE for technical exchange. A recent order for high-powered tugs and luxury river vessels adds to its visibility.

It enjoys a strong balance sheet, zero long-term debt, and pays regular dividends.

To know more about the company, check out its financial factsheet and latest quarterly results.

#3 Paras Defence and Space Technologies

Third on our list is Paras Defence and Space Technologies.

Paras Defence and Space Technologies is one of India's few fully integrated defence tech firms, with expertise across defence optics, electronics, EMP protection, and space systems.

Its niche focus and strong in-house design-to-delivery capabilities position it well in India's defence indigenisation drive.

The smallcap stock is currently down over 30% from its recent high, after a sharp 10% fall on 28 July triggered by disappointing Q1 results.

In Q1 FY26, net profit dropped 25% YoY to Rs 150 m, versus Rs 200 m in the same quarter last year. The decline reflects rising cost pressures and a soft margin profile. It also adds worrying signs for a stock that has historically traded at rich valuations.

This comes despite a strong FY25. Revenue jumped 44% YoY to Rs 3.3 bn, while EBITDA rose 83% to Rs 940 m. Net profit for the year came in at Rs 651 m, up 90% YoY, helped by an improved product mix and operating leverage.

Looking ahead, what adds to the Paras' strength is its growing list of international collaborations. The company has joint ventures with ELSIG of Italy for drone detection and HPS of Germany for deployable space structures.

Most recently, it signed an MoU with Israel's HevenDrones to explore defence and civilian drone opportunities. The collaboration aims to establish a joint venture in India to develop logistics and cargo drones, in line with the government's 'Make in India' initiative.

While near-term margins have been under pressure, Paras is a strong player in India's strategic electronics and space-tech ecosystem.

To know more about the company, check out its financial factsheet and latest quarterly results.

Conclusion

A 15-25% correction in share price doesn't always mean the story has changed.

Sometimes, it's just the market catching its breath. The underlying business momentum continues to align with the government's push for indigenisation and self-reliance.

Meanwhile, order inflows are holding strong. In Q1 FY26 alone, companies across defence and other capital goods sector announced over Rs 500 bn in fresh contracts.

Segments like defence electronics, HVDC and export-linked manufacturing are seeing robust traction, both at home and abroad. This sustained activity provides a solid foundation for future earnings, even if short-term margin pressures or valuation resets create noise.

Ultimately, for long term investors, the real edge lies in looking beyond the charts to assess execution strength, capital allocation, and staying power.

Don't just track how far a stock has fallen. Ask if the fundamentals and growth trajectory are intact. That is what makes an investor successful over the long term.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...