Buy Hindustan Aeronautics; target of Rs 5100: Motilal Oswal

Motilal Oswal is bullish on Hindustan Aeronautics recommended buy rating on the stock with a target price of Rs 5100 in its research report dated April 11, 2025.

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April 11, 2025 / 11:01 IST

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Motilal Oswal's research report on Hindustan Aeronautics

Hindustan Aeronautics (HAL) is a market leader in aerospace defense. It boasts a strong order book of INR1.8t as of 31st Mar’25, along with a promising prospect pipeline of INR6t, which is likely to be awarded over the next few years. The company is transitioning from a traditional licensed model to an indigenized model and is currently working on marque projects such as Tejas Mk1, Tejas Mk1a, Su-30 upgrade, Dornier-25, and Light Utility Helicopter (LUH), et al. These projects are anticipated to fuel manufacturing revenue growth for HAL. Based on recent announcements and our discussions with industry experts, the supply of engines from GE for Tejas Mk1A is likely to commence during FY26. We expect HAL to benefit from 1) a strong pipeline of projects, 2) execution scale-up aided by large platform orders, 3) a stable stream of RoH revenues, 4) backward integration, and 5) a healthy 29%/33%/29% revenue/EBITDA/PAT CAGR over FY25-27. We initiate coverage on the stock with a BUY rating with a TP of INR5,100 based on average of DCF and 32x P/E on Mar’27 estimates. We believe that near-term catalysts will emerge when aircraft deliveries commence as engine supplies from GE resume, while medium- to long-term triggers will stem from the finalization of orders for 97 Tejas-Mk1A, Tejas MK-II, LUH, Advanced Medium Combat Aircraft (AMCA), et al.

Outlook

HAL is currently trading at 31.9x/25.9x FY26E/FY27E EPS. We initiate coverage on the stock with a BUY rating and a TP of INR5,100 premised on average of DCF and 32x P/E on Mar’27E estimates.

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