HAL shares hit 52-week high after Q1 results; Nuvama downgrades stock to 'Hold'

Shares of Hindustan Aeronautics Ltd (HAL) climbed 3.15 per cent during Wednesday’s intraday trade, touching a 52-week high of Rs 5,054.40 after the state-owned aerospace and defence PSU reported its June-quarter earnings. The stock eventually settled 1.22 per cent higher at Rs 4,960. At this level, HAL shares have gained 9.93 per cent over the past one month and 12.84 per cent year-to-date (YTD).

Nuvama Institutional Equities noted that HAL delivered a mixed Q1 FY27, with healthy execution growth of 14.4 per cent year-on-year (YoY) offset by 280 basis points (bps) YoY contraction in gross margin (GM).

"EBITDA margins expanded 110 bps to 28.7 per cent, aided by lower other opex. PAT rose 15 per cent YoY as elevated other income (42 per cent of PBT) offset the impact of a 65 per cent YoY rise in depreciation," it added.

Nuvama said despite a Rs 2.5 lakh crore backlog, near-term growth hinges on execution ramp-up across key platforms, including LCA Tejas, ALH and HTT-40.

Factoring these, the domestic brokerage downgraded HAL to 'HOLD' as the stock has rallied to its TP (target price) while weaker-than-expected product-led execution limits further upside.

"We value the stock at 30x FY28E EPS, factoring in 14 per cent/10 per cent revenue/EPS CAGR and 30 per cent EBITDA margins by FY28E, yielding an unchanged TP of Rs 5,040. The stock currently trades at 33x/30x FY27E/28x EPS," Nuvama stated.

Key monitorables

For HAL, Nuvama highlighted key variables to watch out for over the next 12–24 months. It noted that ramp-up in LCA Tejas deliveries in H2 FY27, contingent on timely supplies from GE, remains the key monitorable.

Execution across ALH, HTT-40 and Sukhoi programmes, along with conversion of the Rs 90,000 crore order pipeline, is also critical for sustaining growth visibility.

"Margin sustainability amid improving execution coupled with new order inflows remain key re-rating triggers," Nuvama said.