HAL's Recent Order Wins, Earnings Potential Keep Analysts Bullish
Analysts at JPMorgan see the HAL stock trading at a "reasonable valuation" of 33 times price-to-earnings.
Hindustan Aeronautics Ltd. received fresh bullish calls from analysts after landing a new defence contract as well as securing the first of the many advanced engines needed to build a fighter jet.
The government signed two contracts worth Rs 62,700 crore with HAL last week for 156 light combat helicopters Prachand for the armed forces. Preceding this, the company received the first of the nearly hundred F404-IN20 engines from US defence major GE Aerospace for the Tejas Light Combat Aircraft Mk-1A variant after a long delay.
Analysts at JPMorgan said the estimated order book in the financial year ending March 31, 2025, stood at Rs 1.9 lakh crore. The focus will now be on the pace of execution of orders.
Moreover, new contracts such as for Su-30MKI upgrade, Tejas Mk2 variant, multi-role helicopters and advanced medium combat aircraft might land on HAL as the sole domestic supplier.
They see the HAL stock trading at a "reasonable valuation" of 33 times price-to-earnings.
UBS raised its revenue and earnings projection by 3% for FY26 and FY27. It also raised Tejas execution estimates from four aircraft in FY26 to seven and 14 in FY27 from six earlier.
"Commencement of engines delivery by GE with accelerated delivery schedule should address issues around execution and recent fast tracking of award for LCH Prachand should address concerns around slowing defence spend," the investment bank said in a note.
HAL Share Price Target
JPMorgan: Maintains 'overweight' with a target price of Rs 4,958, an upside potential of 19% over the previous close.
UBS: Maintains 'buy' with a target price of Rs 5,440, an upside potential of 30%.
Morgan Stanley: Maintains 'overweight' with a target price of Rs 5,292, an upside potential of 29%.
HAL share price closed 0.35% higher at Rs 4,176 apiece on Friday, compared to a 0.25% decline in the benchmark BSE Sensex.
The stock has risen 25% in the last 12 months but has been flat on a year-to-date basis.
Sixteen out of the 17 analysts tracking Hindustan Aeronautics have a 'buy' rating on the stock, and one suggests a 'sell', according to Bloomberg data. The average of the 12-month analyst price target implies a potential upside of 20%.
