Shares of Hindustan Aeronautics Ltd (HAL) rose as much as 3 percent to Rs 4,142 on Friday, April 11 after domestic brokerage house Motilal Oswal kickstarted coverage on the state-run aerospace major with a 'Buy' rating and a target price of Rs 5,100.
This suggests a potential 27 percent upside from the stock’s closing price on Wednesday. Despite the recent rebound, HAL remains around 30 percent below its record high of Rs 5,674.75, scaled in July last year.
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Motilal Oswal believes HAL’s dominance in the defence aviation space, combined with a robust order book and a growing pipeline of future deals, places it in a strong position to capitalise on India’s rising defence spending. As of March 31, HAL’s order book stood at a staggering Rs 1.8 lakh crore, with another ₹6 lakh crore worth of opportunities expected to materialise over the coming years.
The brokerage expects momentum to build in the near term as aircraft deliveries resume — aided by the recommencement of engine supplies from GE. Over the medium to long term, orders for platforms like the Tejas Mk1A, Tejas Mk-II, Light Utility Helicopter (LUH), and the Advanced Medium Combat Aircraft (AMCA) are expected to act as key growth drivers.
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Between FY25 and FY27, HAL’s revenue is projected to grow at a compound annual growth rate (CAGR) of 29 percent, led by a ramp-up in manufacturing activity. Margins are expected to remain firm, with the company’s EBITDA margin likely to improve from 25.9 percent in FY25 to 27.6 percent by FY27 — a trend supported by its continued indigenisation efforts.
The company also plans to invest ₹3,000–5,000 crore annually over the next few years, and with stable working capital, net profits are seen growing in line with revenues. Return ratios are forecast to remain robust, with return on equity (RoE) and return on capital employed (RoCE) estimated to touch 22.5 percent and 23.2 percent, respectively, by FY27.
Valuation-wise, the stock currently trades at 31.9 times its projected FY26 earnings and 25.9 times FY27 estimates.
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However, Motilal flagged a few risks to the story — including delays in large defence order finalisations, slower-than-expected engine deliveries for the Tejas, potential payment lags from the Ministry of Defence, and increased participation from private players in the sector.
At about 2:45 pm, the company's shares were trading at Rs 4,119, up 2.21 percent from the last close on the NSE. HAL shares have gained almost 20 percent in the last month.
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