HAL share price target: 38% upside likely, but risks remain for defence stock

Nirmal Bang Institutional Equities has maintained its 'Buy' rating on Hindustan Aeronautics Ltd (HAL) with a target price of Rs 6,142, citing a robust order book, improving manufacturing mix and strong financial profile. The HAL stock is currently trading at a one-year forward P/E of 24.8 times, above its five-year average of 17 times. Nirmal Bang's target suggests 38 per cent potential upside over Wednesday's closing price of Rs 4,559 apiece.

The domestic brokerage noted that HAL has delivered an 8 per cent revenue CAGR over the past five years, driven largely by Repair & Overhaul (RoH) orders, which contributed 70 per cent of revenue in FY25. Manufacturing and design accounted for 24 per cent and 6 per cent, respectively. Despite delays in GE engine supplies for the LCA Mk1A, revenue grew 2 per cent last year, supported by steady execution of engine programmes such as AL-31FP and RD-33.

Strong order book
According to Nirmal Bang, HAL’s order book of about Rs 2.5 lakh crore provides strong revenue visibility over the medium term. The brokerage expects manufacturing to play a larger role from FY27 as execution of new LCA Mk1A and Su-30 MKI orders ramps up. Engine programmes also provide predictable cash flows, with AL-31FP deliveries spread over eight years.

On the LCA Mk1A, the brokerage highlighted that supply bottlenecks have eased, paving the way for deliveries to begin with two aircraft next month. It expects HAL to deliver around seven aircraft in FY26, against management guidance of five, and 12 in FY27.

The brokerage also pointed to HAL’s debt-free balance sheet, healthy cash reserves and steady dividend payouts, alongside its strategic positioning as a key beneficiary of India’s defence indigenisation drive. Export opportunities in fighters, helicopters and engines are seen as long-term growth drivers.

Nirmal Bang projects revenue, Ebitda and PAT CAGR of 16, 16 and 20 per cent, respectively, over FY25–27E, outpacing management guidance. 

Key risks
However, risks remain. The brokerage cautioned that HAL’s dependence on GE engines poses a risk of delivery slippages in the LCA Mk1A programme. Its reliance on imported avionics, engines and subsystems also leaves it exposed to supply-chain disruptions. Moreover, with over 90 per cent of revenue tied to the Indian Armed Forces, budgetary constraints or procurement delays could impact growth.