Hindustan Aeronautics Ltd.’s blockbuster first quarter performance, especially in terms of operational profitability growth and margin expansion, has been greeted with triple target price raises by brokerages.
JPMorgan has hiked HAL’s price target to Rs 5,733 from Rs 5,145 earlier and maintained an ‘overweight’ rating on the stock backed by high return on capital employed and equities, large orderbooks, and comparatively cheaper valuation.
The brokerage noted that Q1 increases confidence in full year guidance of 10-12% revenue growth and flat margins.
Kotak Securities has maintained an ‘add’ (buy equivavalent) rating for the stock, while hiking the target price to Rs 5305 from Rs 4810.
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The brokerage outlined that the defense company’s growth visibility remains robust with an estimated order pipeline of Rs 9,000 crore.
Key opportunities in this pipeline include the 143 ALH procurement program, the Su-30MKI upgrade contract and Dornier-228 upgrade orders, “all of which are progressing through various approval stages,” Kotak said in its review.
Additionally, beyond FY2027, HAL also expects significant opportunities from Tejas Mk2, LUH (Light Utility Helicopter) and IMRH (Indian Multi-Role Helicopter) program, providing strong long-term order visibility.
Similarly, Nomura has maintained a ‘buy’ rating on the stock, while raising the target price to Rs 6,314 from Rs 6,040 after the company beat its estimates on all fronts.
The brokerage said that growth and execution visibility remains healthy, led by manufacturing book/bill of 25x. Estimates of earnings per share CAGR for FY26 to FY29 stand at 19%.
Tejas Mk1A Delivery Overhang
The brokerages have flagged delivery of LCA Mk1A or Tejas Mk1A as a key overhang and catalyst into assessing further growth of HAL.
“The most pressing issue for HAL remains the non-delivery of LCA Mk1A to the Indian Air Force despite over 20+ airframes being fully built, engine ground runs completed, and three production lines operational,” said JPMorgan.
Kotak called the deliveries a “key near-term milestone,” adding that timely clearance from the Indian Air Force will be crucial for the induction of the Tejas Mk1A fleet.
Citi, which has kept its rating and target unchanged at ‘buy’ and Rs 5,550, said that it sees clear scope for re-rating once LCA deliveries commence. The deliveries could lift a long standing overhang, according to the brokerage.
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