HAL shares fly 8% on bagging largest-ever defence deal; UBS lifts target

HAL share price: Aerospace company Hindustan Aeronautics Limited (HAL) shares were buzzing in trade, on Tuesday, April 1, 2025, in an otherwise weak market, following the announcement of its largest-ever defence contract. HAL share price advanced as much as 7.58 per cent, to hit an intraday high of Rs 4,492.80 per share.

 

However, at 9:24 AM, HAL shares were off day’s high, and were trading 6.32 per cent higher at Rs 4,440.

 

The sharp rally in HAL shares came after the Ministry of Defence (MoD) signed two major contracts with HAL on March 28, 2025. These contracts involve the supply of 156 Light Combat Helicopters (LCH), Prachand, valued at Rs 62,700 crore (excluding taxes). Of the 156 helicopters, 66 are designated for the Indian Air Force and 90 for the Indian Army.

 

 

In addition, the Ministry of Defence signed a separate agreement with Metrea Management for the wet leasing of one flight refuelling aircraft, which will provide air-to-air refuelling training to pilots of the Indian Air Force and Navy.

 

The announcement led Zurich-based UBS to raise its target price for HAL to Rs 5,440, up from Rs 4,800, while maintaining a ‘Buy’ rating, according to reports. The target price reflects an upside of 30.26 per cent from the HAL’s previous close of Rs 4,176.  ALSO READ | Stock Market LIVE Updates: Sensex 150 pts lower at 77,260; Nifty at 23,500

 

UBS analysts were particularly surprised by both the size and timing of the deal, noting that the value of the order, Rs 62,700 crore, far exceeded their expectation of Rs 45,000 crore billion. They had also anticipated the order to be awarded in Q1FY26, making the timing of the deal an unexpected positive.

 

The brokerage also anticipates that FY26 will mark a turning point for defence ordering, with the recent acceleration in decision-making providing further confidence in the outlook. 

In a note dated March 26, 2025, analysts at ICICI Securities highlighted that the delivery of the first F-404 engine by GE marked a major milestone in alleviating execution concerns for HAL. 

 

They also stressed that HAL is positioned for long-term growth as manufacturing ramps up, with the potential for additional orders for the LCA Tejas Mk-1A in the near future. Furthermore, progress continues on the development of the Tejas Mk-II and AMCA. 

 

The analysts believe that the successful execution of the Tejas Mk-1A will also benefit other companies within the supply chain, including BEL, Astra Microwave, and Dynamatic Technologies. 

 

Due to reduced execution risks, they have lowered the WACC to 11 per cent (previously 12 per cent), leading to a revised target price of Rs 5,000 (up from Rs 4,065) based on a DCF methodology. The brokerage also upgraded HAL’s rating to ‘Buy’ from ‘Add’ earlier.

  End with a bang    

HAL capped off FY25 with robust results, reporting provisional revenue of Rs 30,400 crore, slightly higher than the previous year's Rs 30,381 crore, the company said, in a statement.

The company made considerable strides in expanding its capabilities over the past year, majorly strengthening its order book. 

 

HAL added new production lines for the Light Combat Aircraft (LCA) and HTT-40, while also boosting its aero engine capacity at the Koraput facility. The total order book surged to Rs 1,84,000 crore, up from Rs 94,129 crore at the start of the year, after factoring in current year liquidations.   ALSO READ | Rites up 3% on bagging order from Oil India; Infomerics reaffirms rating

 

During FY25, HAL secured new manufacturing contracts valued at Rs 1,02,000 crore, alongside Rs 17,500 crore in ROH contracts. A key milestone was the signing of a contract with the Ministry of Defence for the supply of 156 LCH Prachand helicopters, worth Rs 62,777 crore, marking the largest-ever procurement from HAL by the Ministry of Defence.

 

"This achievement was despite the shortfall in deliveries of LCA and ALH. The deliveries of LCA were affected due to non-availability of engines. The ALH delivery schedule too got hit due to the accident in January 2025 and subsequent grounding of the Fleet. However, the deliveries of other products and services were accelerated which helped us to maintain the top line", said D K Sunil, CMD, HAL.

 

Other key highlights of 2024-25, according to HAL, include becoming the first Defence PSU to be awarded the prestigious 'Maharatna' status. Additionally, the company signed contracts for the supply of 12 more Su-30 MKI aircraft, the mid-life upgrade (MLU) of 40 Do-228 aircraft, the delivery of 240 AL31FP engines for Su-30 MKI aircraft, and an avionics upgrade for one IL-78 aircraft. Lastly, the first AL31FP engine was delivered within just one month of contract signing.  ALSO READ | HBL Engineering shares soar 8% on ₹762 crore order win from Central Railway

 

That said, with supply chain challenges now stabilising, new orders secured, and production capacities expanded, HAL is primed for even stronger physical and financial performance in FY26, ready to capitalise on a growing defence market and a strengthened position in the industry.