PSU defence stock: HAL shares recover 37% in seven weeks. What's the way ahead?

PSU defence stock: Hindustan Aeronautics share price has increased by 37% over the last seven weeks. The PSU defence stock faced challenges from June 2024 through February 2025, but started to recover in March 2025. Brokerage firm JM Financial anticipates that HAL shares will outperform the Nifty 50.

In its report, the domestic brokerage noted that HAL shares benefit from a favourable price trend in the second quarter of the calendar year. Over the past five years, it has ended the second quarter positively on each occasion, yielding an average return of approximately 34%. Year-to-date, the stock has slightly outperformed the Nifty 50 by about 2%, according to the JM Financial report.

Anshul Jain, Head of Research at Lakshmishree Investment and Securities, explained that HAL share price, after a sharp 45.79% correction in just 35 weeks post a buying climax, is now showing signs of strength with a higher low on weekly charts.

HAL share price has also retraced 50% of the fall at ₹4,313. Immediate resistance lies in the ₹4,300–4,320 zone; above this, ₹4,444 (swing high) will be the next hurdle. If HAL share price sustains above ₹4,320, the logical upside target is ₹4,720.8, indicating potential for a strong bounce-back rally. On Thursday's session, HAL share price was nearly up 1% on the BSE, the PSU defence stock touched an intraday high of ₹4,242.10, and an intraday low of ₹4,195 per share on the BSE.

On a fundamental level, brokerage Nirmal Bang has retained a 'buy' recommendation with a target price of ₹4,851, which values the stock at 24 times the estimated EPS for March 2027, bolstered by a strong order book.

The company's order book has shown significant improvement over the past year, during which the company expanded its capacities by adding new production lines for the LCA and HTT-40, in addition to increasing the aero engine capacity at Koraput. The current order book is at ₹1,84,000 crores, compared to the initial order book of ₹94,129 crores, after accounting for the liquidation in the current year.

Additionally, the brokerage noted that the sector is witnessing positive movement driven by multiple factors: a stronger focus on indigenisation and "Atmanirbhar Bharat" programs, increased allocations for the defence budget, rising geopolitical tensions, a growing list of indigenisation efforts, opportunities for defence exports, and investments in cutting-edge technologies like AI and robotics.

Q4FY25 Update

According to the company's filing, HAL achieved a revenue of ₹30,400 crores (provisional and unaudited) for the financial year ending March 31, 2025, compared to a revenue of Rs. 30,381 crores in the previous year.

In the year 2024-25, HAL secured new manufacturing contracts totaling ₹1,02,000 crores and ROH contracts amounting to ₹17,500 crores. Recently, the company finalised a contract with the Ministry of Defence for the provision of 156 LCH Prachand helicopters, valued at ₹62,777 crores. This marks the largest single procurement by the Ministry of Defence from HAL to date.

"With the supply chain issues stabilizing, new orders in hands and enhancement of capacities, the company is gearing up for more robust physical and financial performance in the FY 2025-26," the company said in an exchange filing.

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