Hindustan Aeronautics Maintains Bullish Recommendation from Prabhudas Lilladher, Target Price: Rs 5423

Hindustan Aeronautics Reports Soft Quarterly Performance but Guides for Strong Revenue Growth

Hindustan Aeronautics (HAL), a leading Indian aerospace and defense company, recently reported a soft quarterly performance with revenue growth of approximately 2% year-over-year (YoY). This growth was largely overshadowed by a decline in earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, which contracted by 237 basis points (bps) YoY to 36.3%. Despite this, management has provided a positive outlook for the company, expecting revenue growth of around 10-12% in fiscal year (FY) 2027, driven by the ramp-up in manufacturing revenues led by the LCA Mk1A and HTT-40 deliveries.

The company is expecting robust order inflows of approximately Rs900 billion over the next two years, supported by large opportunities across ALH helicopters, Su-30 upgrades, Dornier aircraft, and engine manufacturing programs. The LCA Mk1A program is witnessing improving execution visibility, with GE engine supplies gradually normalizing and deliveries expected to commence from September 2026. HAL targets delivery of 15-20 aircraft in FY27, supported by three operational production lines and significant inventory already built. Execution across LCH Prachand, HTT-40, and engine programs also remains on track, while long-term opportunities in UAVs, AMCA, and indigenous aero-engine programs continue to strengthen HAL's strategic positioning in India's defense ecosystem.

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HAL plans to make cumulative investments of approximately Rs120 billion by 2030 towards capacity expansion, aero-engine infrastructure, and next-generation defense platforms. This investment is expected to support long-term growth. The company's stock is currently trading at a price-to-earnings (P/E) ratio of 31.7x/28.3x on FY27/28E earnings. We maintain a 'Buy' rating, valuing the stock at a P/E of 35x March 2028 earnings, arriving at a target price of Rs5,423.