HAL's growth runway stays clear; brokerages keep 'Buy' ratings intact

HAL Q2 results review: Brokerages remain optimistic on Hindustan Aeronautics Ltd (HAL) after the state-run defence major reported a mixed September quarter (Q2FY26), with solid revenue execution but weaker profitability amid higher provisioning costs. 

 

On the bourses, HAL share price was trading 0.27 per cent lower at ₹4,734 per share at 10 AM. By comparison, the BSE Sensex was trading flat at 84,463.92 levels.

 

Analysts believe the company’s robust order book, easing supply bottlenecks and improving production ramp-up will underpin multi-year growth momentum.

 

Choice Broking said HAL delivered a ‘reasonably strong operational performance’ during the quarter, even though profitability witnessed some contraction due to elevated provisioning expenses. “Despite this, we remain confident that HAL is well-positioned for a stronger second half in FY26, with topline acceleration expected from multiple ongoing and new programs,” the brokerage noted.

 

It added that operational momentum continues to strengthen, with production lines in Bengaluru and the newly commissioned Nashik facility being ramped up. A “robust order backlog of over 7.1x of FY25 revenue provides a multi-year revenue runway,” Choice Broking said.  CATCH STOCK MARKET LIVE UPDATES TODAY

 

The brokerage highlighted that a key execution bottleneck –  the supply of GE F404 engines – is now easing, aided by resumed deliveries and a recent contract for an additional 113 F404-GE-IN20 engines. “This development significantly de-risks HAL’s FY27-FY28E revenue trajectory,” it said, maintaining a ‘Buy’ rating with a target price of ₹5,570, valuing the stock at 35 times FY27-28 estimated earnings.

 

Analysts at Nuvama Institutional Equities said HAL posted ‘healthy execution’ with revenue up 11 per cent Y-o-Y, but operating profit margin (OPM) declined to 23.5 per cent – the weakest in recent quarters. The brokerage attributed the dip to a 290-basis-point fall in gross margin and a two-fold rise in liquidated damages provisioning for delayed deliveries.

 

While no reversal of these provisions is expected, Nuvama said HAL’s strong order book of around ₹2.3 trillion (7x FY25 sales) ensures sustained multi-year growth visibility. It retained a ‘Buy’ rating ‘with a long-term lens,’ factoring in a ~17 per cent revenue CAGR over FY25–28, led by base orders such as ROH and engine programmes. 

 

However, slower Tejas deliveries are seen capping earnings per share (EPS) growth to around 8 per cent and RoE at 20 per cent by FY28. The brokerage cut its FY27-28 EPS estimates by 2-7 per cent and lowered its target price to ₹5,800 (from ₹6,000), valuing HAL at 38x Sep-27E earnings.

 

Motilal Oswal Financial Services said HAL’s Q2FY26 revenue and profit were largely in line with its expectations, as lower margins were offset by higher other income. The brokerage noted that HAL received a follow-on order of 97 Tejas Mk1A jets worth ₹62,400 crore during the quarter and signed a contract with GE for engine supplies.

 

“Tejas aircraft deliveries and execution of the manufacturing order book will be key drivers for the stock going forward,” Motilal Oswal said, maintaining its ‘Buy’ rating with a target price of ₹5,800, based on an average of DCF and 32x Sep-27E earnings.

 

HAL Q2 results

 

Hindustan Aeronautics Ltd reported an 11 per cent Y-o-Y rise in revenue to ₹6,629 crore for the September quarter (Q2FY26), compared with ₹5,977 crore a year ago (Q2FY25). Net profit grew 10.5 per cent Y-o-Y to ₹1,669 crore from ₹1,510.5 crore, driven by healthy topline growth. 

 

However, Ebitda declined 5 per cent to ₹1,558.4 crore, while margins contracted sharply to 23.5 per cent  from 27.37 per cent a year earlier, impacted by higher costs. 

 

For the first half of FY26, HAL’s margin stood at 24.81 per cent, trailing its full-year guidance of 31 per cent.