This is probably the most difficult battle in the entire game. :)
I replayed it about 6-7 times.
The most important thing here is the dragons. Position them in a corner before the battle (so that a minimal number of enemy units attack them). You can also place a couple of your own units in front of them, leaving only one path to them. From the very beginning, use antimagic on them so that the cave dwellers don't use the "disintegration ray" spell, thus preserving their defense and speed.
And use resurrection runes. All your other troops will fall quite easily. At the beginning, when the enemy still has a lot of troops, you can use them to defend, as they will only attack once per turn when retaliating. Constantly apply the restoration rune to them so that you can resurrect them. In the meantime, you can attack some of the enemy units with Divine Retribution (I used it to kill the devils).
Don't forget to destroy the ammunition cart with your archers at the beginning. At first, while you haven't killed his archers (demons) with Divine Retribution, you can skip turns with the catapult, because if you don't break through his walls, his main troops won't come out while the archers are shooting.
Don't use Divine Retribution right away; let more of your units fall, so you can kill the demons all at once later.