Target: Rs 2,266
CMP: Rs 1,929.10
We initiate coverage on Hindustan Aeronautics (HAL) with a ‘Buy’ rating and a target price of Rs 2,266 (weighted average price using DCF and PE multiples).
HAL is an initiative in the ongoing enhancement and modernization of India’s air defense forces because: It is a major supplier of military aircraft to India; Opportunities for long-term sustainable demand due to the government’s push to procure indigenous defense aircraft; Due to the development of more advanced platforms ( Tejas, AMCA, etc.), HAL’s technological capabilities have taken a leap forward; order book is as high as Rs 81,800 crore, with reserves of approximately Rs 200 crore for the next five years; and profitability is improved through scale and operating leverage.
We estimate revenue/adjusted. The compound annual growth rate of PAT in fiscal year 23-26 is 11/14.2%. The stock currently trades at 20.8 times/18.3 times FY2025/26 financial year earnings.
Main risks: Delays in manufacturing platform execution may impact revenue recognition and increase costs;
HAL’s sales and cash flow are largely dependent on the amount and timing of DoD budget allocations. Any changes in government systems may affect defense allocations, domestic procurement policies,
Disruptions in the supply chain of critical materials and LRUs to foreign OEMs (as seen in the Russia-Ukraine war) could adversely affect the business.