Hold Hindustan Aeronautics; target of Rs 2787: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Hindustan Aeronautics with a target price of Rs 2787 in its research report dated February 13, 2024.

Broker Research

February 14, 2024 / 14:08 IST

Hold

26 Aug, 2025 12:21

Volume

Todays L/H

Prabhudas Lilladher's research report on Hindustan Aeronautics

Hindustan Aeronautics (HAL) reported 7.0% YoY revenue growth in Q3FY24 with EBITDA margin expanding by 629bps YoY to 23.7%, led by lower provisions. Defence Acquisition Council accorded acceptance of necessity for acquisition of ~97 more Tejas Mk1A aircraft & ~156 LCH Prachand helicopters and upgradation of ~84 Su-30MKI aircraft indigenously by HAL. Meanwhile, capital outlay on aircraft & aeroengines for defence forces in FY25 interim budget grew ~44% to Rs408bn (vs Rs282bn in FY24BE). These positive developments provide a boost to the company’s long-term revenue visibility. We believe HAL is a long-term play on the growing strength & modernization of India’s air defence 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 in defence, 3) leap in HAL’s technological capabilities due to development of advanced platforms (Tejas, AMCA, etc.), 4) robust order book with further 5-year pipeline of Rs2trn+, and 5) improvement in profitability via scale & operating leverage. The stock is currently trading at a P/E of 32.1x/28.3x on FY25/26E earnings. We roll forward to FY26E and value the stock using an equal-weighted average of DCFderived price and P/E-derived price based on 28x FY26E (23x Sep-25E earlier). Downgrade to ‘Hold’.

Outlook

We revise our FY24E EPS estimate by +4.0% YoY factoring in higher other income, but downgrade the rating to ‘Hold’ from ‘BUY’ owing to steep run up in valuation with a revised TP of Rs 2,787 (Rs2,266 earlier).

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