HAL shares rally 45% since April. Is the stock still attractive after Q1 earnings?

Shares of Hindustan Aeronautics (HAL) have been on a strong recovery run in recent months, as sentiment towards the broader defence sector has improved amid expanding order books, strengthening defence spending and accelerating export momentum.

Since April, the stock has rallied 45% to around ₹4,945, moving closer to its record high of ₹5,675, turning 2026 returns to 13% so far. The strong run has raised expectations that the stock could maintain its momentum and extend its gains further.

However, brokerages have offered mixed views following the company's better-than-expected June-quarter performance, with profitability largely in line with estimates and margins beating expectations despite a sharp rise in raw material costs.

Brokerages remain divided on HAL

Motilal Oswal said the company's results came in ahead of its estimates and therefore kept its earnings estimates unchanged. The brokerage retained its 'Buy' rating on the stock with a target price of ₹5,800 apiece.

With supply-chain-related issues for GE starting to ease, the brokerage expects Tejas deliveries to ramp up from FY28 onwards. Beyond Tejas, execution of other platforms, including LCH Prachand, ALFP 31 engines, HTT-40, RD-33 engines, and 12 units of Su-30 aircraft, is also expected to pick up and support topline growth.

Anand Rathi has also retained its 'Buy' rating on HAL with a target price of ₹5,800 apiece. Even as the stock rallied 42% from April, the brokerage said that it trades at 35.9x FY27E EPS at a current market price of ₹4,960, compared with the target price-implied multiple of 39.3x, according to Anand Rathi.

While much of the re-rating has already been captured ahead of deliveries, the brokerage believes the 9.5% potential upside, along with improving execution, supports its positive view on the stock.

Meanwhile, JM Financial has an 'Add' rating on the stock with a target price of ₹4,770, valuing HAL at its post-Covid historical average of 29x FY28E EPS of ₹164.

InCred Equities has a 'Hold' rating on the stock as it believes a higher product mix, including Tejas, LCH, ALH, Su-30, and Do-228, will support margins going forward, while the company's ₹15,000-crore capex plan over the next 3-4 years could weigh on cash accruals and working capital.

InCred has assigned a 30x target P/E multiple on FY28F earnings and expects a 6% EPS CAGR over FY26-28F.

Upbeat show in Q1

For the June quarter, the company reported a 14.9% year-on-year (YoY) increase in consolidated profit to ₹1,589.68 crore, aided by a 20.5% growth in other income. Revenue from operations rose 14.4% YoY to ₹5,515.17 crore, exceeding the management’s FY27 revenue growth guidance of 10-12%.

On the operating front, consolidated EBITDA increased nearly 19% YoY to ₹1,538 crore, while the EBITDA margin improved by 106 basis points to 27.9%, compared with 26.8% in the year-ago period.

The improvement in operating profitability came despite a 280-basis-point contraction in gross margin to 65.2%, as raw material costs increased 24.5%. Disciplined control over overheads provided an offset, with employee costs rising only 10.3%, while other expenses declined 4.7%.

HAL closed FY26 with an order book of ₹2.54 lakh crore and expects around ₹90,000 crore of fresh orders, including Repair, Overhaul, and Maintenance (ROH), over FY27-28E. Other programme milestones also remain supportive.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.