HAL shares rally 45% since April. Is the stock still attractive after Q1 earnings?

Domestic brokerages retained a positive but mixed view on Hindustan Aeronautics (HAL) following its healthy June-quarter performance.

Motilal Oswal said the company’s results came in ahead of its estimates and therefore kept its earnings estimates unchanged. The brokerage retained its ‘Buy’ rating on the stock with a target price of ₹5,800 apiece.

With supply-chain-related issues for GE starting to ease, the brokerage expects Tejas deliveries to ramp up from FY28 onwards. Beyond Tejas, execution of other platforms, including LCH Prachand, ALFP 31 engines, HTT-40, RD-33 engines, and 12 units of Su-30 aircraft, is also expected to pick up and support topline growth.

Anand Rathi has also retained its ‘Buy’ rating on HAL with a target price of ₹5,800 apiece. Even as the stock rallied 42% from April, the brokerage said that it trades at 35.9x FY27E EPS at a current market price of ₹4,960, compared with the target price-implied multiple of 39.3x, according to Anand Rathi.

While much of the re-rating has already been captured ahead of deliveries, the brokerage believes the 9.5% potential upside, along with improving execution, supports its positive view on the stock.

Meanwhile, JM Financial has an ‘Add’ rating on the stock with a target price of ₹4,770, valuing HAL at its post-Covid historical average of 29x FY28E EPS of ₹164.

InCred Equities has a ‘Hold’ rating on the stock as it believes a higher product mix, including Tejas, LCH, ALH, Su-30, and Do-228, will support margins going forward, while the company’s ₹15,000-crore capex plan over the next 3-4 years could weigh on cash accruals and working capital.

InCred has assigned a 30x target P/E multiple on FY28F earnings and expects a 6% EPS CAGR over FY26-28F.

HAL Q results

For the June quarter, the company reported a 14.9% year-on-year (YoY) increase in consolidated profit to ₹1,589.68 crore, aided by a 20.5% growth in other income. Revenue from operations rose 14.4% YoY to ₹5,515.17 crore, exceeding the management’s FY27 revenue growth guidance of 10-12%.

On the operating front, consolidated EBITDA increased nearly 19% YoY to ₹1,538 crore, while the EBITDA margin improved by 106 basis points to 27.9%, compared with 26.8% in the year-ago period.

The improvement in operating profitability came despite a 280-basis-point contraction in gross margin to 65.2%, as raw material costs increased 24.5%. Disciplined control over overheads provided an offset, with employee costs rising only 10.3%, while other expenses declined 4.7%.

Strong order book

HAL closed FY26 with an order book of ₹2.54 lakh crore and expects around ₹90,000 crore of fresh orders, including Repair, Overhaul, and Maintenance (ROH), over FY27-28E. Other programme milestones also remain supportive.

HTT-40 deliveries are scheduled to begin in FY27 and conclude by FY30, while the remaining 15 AL-31FP engines and 10 Army ALHs are targeted for delivery in FY27. Meanwhile, the 12-aircraft Su-30MKI programme is scheduled for one delivery in FY28 and the remaining 11 in FY29.

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