Hindustan Aeronautics shares: Motilal Oswal initiates coverage, see up to 27% upside

Domestic brokerage firm Motilal Oswal Financial Services has initiated coverage on Hindustan Aeronautics (HAL), a prominent entity in the aerospace defence sector, which continues to solidify its market leadership. As of March 31, 2025, it reported a robust order book amounting to Rs 1.8 lakh crore and a promising prospect pipeline valued at Rs 6 lakh crore.
 

This pipeline is anticipated to be realised over the forthcoming years, highlighting the company's strategic positioning in the industry, said Motilal Oswal. HAL is undergoing a significant transformation from a traditional licensed model to an indigenised approach.


The company's focus on this shift is evident in its work on notable projects, including Tejas Mk1, Tejas Mk1a, Su-30 upgrades, Dornier-25, and the Light Utility Helicopter (LUH). These initiatives are expected to be pivotal in driving manufacturing revenue growth in the near future, it noted.

Backed by a comprehensive backward integration strategy, HAL is expected to maintain a healthy revenue, EBITDA, and PAT compound annual growth rate (CAGR) of 29 per cent, 33 per cent, and 29 per cent, respectively over the fiscal years 2025-2027. These figures underscore HAL's anticipated financial health and growth potential during this period, said MOSL.

Shares of Hindustan Aeronautics surged more than 2.2 per cent during the trading session on Friday, commanding a total market capitalization of more than Rs 2.75 lakh crore. The defence stock had settled at Rs 4,031.05 on Wednesday. The stock has rebounded over 35 per cent from its 52-week low at Rs 3,045.95 hit on March 3, 2025.
 

In the short term, the resumption of engine supplies from GE and the commencement of aircraft deliveries are seen as immediate catalysts for growth. These developments are likely to enhance HAL's operational capacity and market presence, the brokerage noted.
 

In light of these developments, a 'buy' rating has been issued for HAL's stock by Motilal Oswal, with a target price set at Rs 5,100. This valuation is based on a blend of discounted cash flow (DCF) and a 32x P/E ratio on March 2027 estimates, indicating confidence in the company's financial performance and growth trajectory.
 

Looking ahead, medium- to long-term growth is anticipated from the finalisation of orders for 97 Tejas-Mk1A, Tejas MK-II, LUH, and Advanced Medium Combat Aircraft (AMCA). These contracts represent substantial opportunities for HAL to expand its market influence and operational capabilities.
 

Overall, HAL's strategic initiatives, including its indigenisation efforts and robust project pipeline, position the company well for continued growth and market leadership in the aerospace defence sector. Stakeholders and investors are optimistic about the company's trajectory in the coming years.