Post Operation Sindoor, the Indian Air Force is focusing on quickly re-building its squadron strength. Given HAL's long history, its involvement in designing and developing all coming indigenous platforms, coupled with policy tailwinds, augur well for its growth prospects.
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Anand Rathi Report
At the current market price, the stock quotes at 27.1x FY27e earnings per share (16% discount to mean + 2σ levels). Hindustan Aeronautics Ltd. is entering a double-digit revenue-growth trajectory, led by strong traction in its manufacturing business, to last till at least FY32.
Given the huge order book, strong awarding pipeline, clean balance sheet, healthy RoEs and its monopoly, we expect it to be further re-rated.
Accordingly, we assign a 32.4x P/E (implying mean + 2σ) to our average of our FY27e and FY28e EPS of Rs 183.7/share, to arrive at a target price of Rs 5,950. Given the 32% potential, we initiate coverage with a Buy rating.
Risks: Import of platforms, delays in raw material procurement affecting the program.
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