HAL analysts see this as a key catalyst for the stock despite execution challenges; check targets

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Brokerages see the commencement of LCA Mk1A deliveries in the second half of FY27 and greater visibility on the GE engine production agreement as key potential catalysts. CLSA considers HAL the cheapest pure-play defence stock despite its leading position in the sector.

Shares of Hindustan Aeronautics Ltd. (HAL) were trading flat on Friday, November 13, after brokerage firms assessed the company's September quarter results, which showed weakness on the operating front.

While revenue growth exceeded expectations and net profit was largely in line with estimates, EBITDA and margins came in below expectations. However, the company's first-half performance remained broadly in line with its full-year guidance.

HSBC has a 'Buy' rating on HAL, with a price target of ₹6,350. The brokerage said that revenue growth of 14.9% year-on-year exceeded its estimates. However, EBITDA margin declined 70 basis points YoY to 22.8%, with lower gross margins, potentially due to an unfavourable product mix, weighing on profitability.

HSBC also highlighted a sharp increase in inventory levels, which rose around 28% in the first half of FY27, potentially reflecting the build-up of LCA Mk1A airframes ahead of deliveries.

According to the brokerage, HAL's order book is not a concern, with execution remaining the key challenge. HSBC expects deliveries of LCA Mk1A aircraft to commence by the end of FY27.

Nomura has maintained a 'Buy' rating on HAL, with a price target of ₹6,314. The brokerage described the company's Q2FY27 operating performance as steady, while noting that EBITDA came in 5% below its estimates. Net profit, however, was largely in line with expectations.

Nomura highlighted healthy order visibility, supported by a manufacturing book-to-bill ratio of around 25 times. The brokerage estimates HAL's FY26-29 earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of 19%. The stock is currently trading at around 21 times its FY29 estimated earnings.

CLSA has an 'Outperform' rating on HAL, with a price target of ₹5,625. The brokerage attributed the growth in net profit to higher deliveries of engines and helicopters, the commencement of aircraft deliveries and treasury income.

CLSA also highlighted HAL's cash balance, which increased 7%…

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