In a bullish note, leading brokerage firm Anand Rathi has initiated coverage on Hindustan Aeronautics Ltd (HAL) with a ‘Buy’ rating, projecting a 32% upside potential. The recommendation comes as the Indian Air Force (IAF), post Operation Sindoor, ramps up efforts to restore and strengthen its fighter squadron capacity.

Anand Rathi highlights HAL’s unmatched expertise in the Indian aerospace sector, citing its deep involvement in designing and manufacturing all upcoming indigenous platforms. The brokerage believes strong policy support, long-term defense spending plans, and HAL's monopoly in domestic defense aviation will drive sustainable double-digit revenue growth, at least until FY32.

Valuation & Target Price

At its current market price, HAL trades at 27.1x FY27E EPS, which is at a 16% discount to its long-term mean + 2σ valuation. Given HAL’s robust order book, healthy return ratios, clean balance sheet, and consistent government support, the stock is expected to be re-rated.

Anand Rathi assigns a 32.4x P/E multiple to the average of FY27E and FY28E EPS (₹183.7/share), setting a target price of ₹5,950, representing a 32% upside from current levels.

Key Growth Drivers

  • Large defense order book & expanding pipeline

  • Strong demand for indigenous aircraft platforms

  • Clean balance sheet with healthy RoE

  • Monopoly in Indian defense aviation

  • Policy tailwinds favoring local manufacturing (Atmanirbhar Bharat)

Risks

  • Delays in raw material procurement

  • Dependence on imported components or platforms