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Around 600% jump in 5 years: Citi maintains 'buy' on Maharatna defence PSU HAL for up to 28% - Check target, rationale

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In short

HAL posted a 16% year-on-year rise in second-quarter net profit to ₹1,935.64 crore, even though its EBITDA missed brokerage projections. Stable contributions from helicopters, engines, and repair services helped balance manufacturing bottlenecks tied to the Indian Air Force's light combat aircraft. Looking ahead, corporate leadership has projected full-year revenue growth between 10% and 12%, supported by targeted margins of 30% to 31%.

Key points

  • Institutional measures to resolve Tejas Mk1A delays are crucial for sustaining long-term…: Institutional measures to resolve Tejas Mk1A delays are crucial for sustaining long-term order execution.
  • Robust repair operations and engine production continue to provide steady financial suppo…: Robust repair operations and engine production continue to provide steady financial support against aircraft delivery lags.
  • Management expects FY27 operating performance to stay solid with EBITDA margins projected…: Management expects FY27 operating performance to stay solid with EBITDA margins projected between 30% and 31%.

Sources checked by our analysis pipeline: 1

Hindustan Aeronautics Ltd (HAL) shares have recently faced selling pressure, with the Maharatna defence public sector undertaking (PSU) stock declining 3.5% in one week, 1% in one month and 3% in three months. However, the stock remained in positive territory over longer periods, gaining 4% in six months and 1% in one year. It also delivered multibagger returns of around 600% over five years.

In the previous trading session, HAL shares fell 0.7% to close at ₹4,809.80. Despite the recent weakness, international brokerage Citi maintained its bullish stance on the defence major, retaining its 'Buy' rating and target price of ₹6,175 per share. The target indicated an upside potential of around 28% from the previous close.

Citi said HAL's Q2 revenue was in line with its estimates, although EBITDA missed expectations due to weaker gross margins. The brokerage added that the company's engines, helicopters and repair work helped offset the delayed Mk1A ramp-up. HAL's inventory also increased 39% year-on-year (YoY), signalling rising preparedness for execution, according to the report.

The Maharatna central public sector enterprise reported its financial results for…

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