Up to 21% upside ahead: 'Buy' this defence PSU stock, says JM Financial - Here's why

Defence stock: Shares of Hindustan Aeronautics Ltd (HAL) offer a favourable risk-to-reward ratio to investors as the defence stock has fallen 22% in the last six months against a 8% fall in the Nifty. This seems to price in most of the headwinds, says brokerage JM Financial while initiating coverage on the leading defence sector stock. 

HAL shares are set for an upside of 21% with a target price of Rs 4875, according to the brokerage, which estimates strong addressable order prospects of Rs 9 lakh crore for the air defence segment over the next 6–7 years.

The brokerage pegs order prospects of Rs 2 lakh crore in the bear case, Rs 4.7 lakh crore in  the base case and Rs 8.6 lakh crore in the bull case for HAL’s manufacturing segment. 

Powered by a slew of orders, JM projects CAGR of 21% over FY26–28E led by manufacturing order deliveries led by 50% plus CAGR in manufacturing revenue led by deliveries of LCA Tejas Mk1A. 

Th brokerage also expects a ramp-up in deliveries of HTT-40 trainer aircraft and LCH Prachand to drive revenue growth. 
It mentions key downside risks to the buy call. These are a further decline in valuations due to delay in manufacturing order inflows led by: i) delay in approvals for order prospects; ii) risk of loss of orders to import substitution; iii) rising competition from private sector in large platform orders; and iv) lower-than-estimated execution led by delay in delivery of 
critical parts.

Meanwhile, HAL shares closed at Rs 4032 in the previous session on BSE. The stock hit a 52-week low of Rs 3479.20 on March 30, 2026 and Rs 5166 on May 16, 2025. Market cap of the firm stood at Rs 2.74 lakh crore. 

CLSA has an “outperform” rating on the stock with a price target of Rs 5,175. 

The global brokerage cited HAL’s strong order backlog of around Rs 2.5 lakh crore, which provides revenue visibility of nearly 14 years based on its FY27 product revenue.