Despite a significant price target reduction, Hindustan Aeronautics (NSE:HIAE) Limited (HAL) continues to attract strong buy recommendations from global analysts who see substantial growth potential in India’s premier aerospace and defence manufacturer.
Global brokerage firm UBS has maintained its ’Buy’ rating on the state-run defence giant while trimming its price target to INR 4,800 from INR 5,700 previously. Even with this 16% reduction, the revised target suggests compelling upside potential of nearly 40% from current market levels.
In its latest research note, UBS emphasized that market pessimism surrounding HAL appears misplaced and fails to account for the company’s long-term growth trajectory. The brokerage anticipates minimal impact on HAL’s earnings estimates for FY26 and FY27, highlighting instead the possibility of consensus-beating order inflows.
"FY26 could mark an inflection point for defence orders," noted UBS analysts, pointing to HAL’s subsidiary, Hindustan Aeronautics Next-Gen Aerospace Ltd. (HNAL), as a key beneficiary of this anticipated surge. The firm projects HNAL’s order book could expand threefold by FY27, maintaining stable execution over the next two fiscal years.
This growth outlook translates to an impressive 19% compound annual growth rate (CAGR) in both revenue and earnings through FY27, reinforcing the bullish case for the defence manufacturer.
HAL’s strong fundamentals are already evident in its recent performance. The company reported a 14% increase in consolidated net profit to INR 1,440 crore for the December quarter, up from INR 1,261 crore year-over-year. Revenue from operations also climbed 15% to INR 6,957 crore, driven by sustained demand from the defence ministry.
Valuation Perspective
While analyst optimism runs high—with 15 out of 16 analysts covering HAL recommending ’Buy’—investors should consider valuation metrics before making investment decisions. According to data from InvestingPro, HAL’s fair value stands at INR 3,497.5 per share, representing just a 1.7% upside from the current market price of INR 3,439.9.
Image Source: InvestingPro
This valuation gap between the market consensus target of INR 4,873.69 (implying a 42% upside) and InvestingPro’s fair value calculation suggests investors might benefit from waiting for a wider valuation disconnect before establishing new positions.
InvestingPro’s fair value assessment utilizes multiple financial models to derive a realistic company valuation, offering investors crucial insights into whether stocks like HAL are currently overvalued or undervalued. This precision tool is part of a comprehensive suite of analysis features available to subscribers, helping investors make more informed decisions in today’s complex market environment.
For those looking to enhance their investment research capabilities, InvestingPro is currently offering subscription discounts of up to 45%, providing an opportune moment to access professional-grade valuation tools that could prove invaluable when evaluating high-potential stocks like HAL.
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