Accumulate Hindustan Aeronautics; target of Rs 4692 Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Hindustan Aeronautics with a target price of Rs 4692 in its research report dated November 14, 2024.

Broker Research

November 15, 2024 / 11:46 IST

Accumulate

26 Aug, 2025 12:21

Volume

Todays L/H

Prabhudas Lilladher's research report on Hindustan Aeronautics

Hindustan Aeronautics (HAL) reported 6.0% YoY revenue growth in Q2FY25 with EBITDA margin increasing by 33bps YoY to 27.4%. During the quarter, HAL secured an order valued at ~Rs260bn for 240 AL 31-FP engines to power Sukhoi Su-30 fleet, with deliveries scheduled over an 8-year period starting Sep’25. The company continues to encounter delays in receiving F-404 engines from GE Aerospace, which has impacted the progress of the Tejas Mk1A program. The first batch of F-404 engines is now expected by Mar’25, marking a 2-year delay from the original schedule. The ToT agreement for F-414 engines with GE Aerospace, intended to power the Tejas Mk2, has also been postponed from Dec’24 to mid-2025. We believe HAL is a long-term play on the growing strength & modernization of India’s air defense given 1) it is the primary supplier of India’s military aircraft, 2) long-term sustainable demand opportunity owing to government’s push on indigenous procurement of defense aircraft, 3) a robust order book with a 3- year pipeline of Rs2trn+, 4) leap in HAL’s technological capabilities due to development of advanced platforms (Tejas, AMCA, GE-414 & IMRH engines, etc.), and 5) improvement in profitability via scale & operating leverage. The stock is currently trading at a P/E of 41.9x/36.5x/32.2x on FY25/26/27E earnings. We roll forward to Sep’26E and value the stock at a P/E of 40x Sep26E (40x FY26E earlier). Upgrade to ‘Accumulate’.

Outlook

We upgrade the rating to ‘Accumulate’ from ‘Hold’ given the recent correction in stock price with a revised TP of Rs 4,692 (Rs4,515 earlier).

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