Hindustan Aeronautics (HAL) share price declined for the second consecutive session on Tuesday, May 20th. The performance comes amid global brokerage UBS trimming its stance on HAL. Defence stocks, including HAL in India, have led a strong rally since Operation Sindoor, making them richly valued.
YTD, HAL shares are up by 16.3% on BSE.
HAL Share Price:
On BSE, the heavyweight defence stock ended at Rs 4850 apiece on BSE, down by 3.32% with a market cap of Rs 3,24,355.88 crore. This is the second losing session of HAL. From May 19-20, HAL shares are down by 5.65%. The stock's 52-week high and low is at Rs 5,675 apiece and Rs 3,045.95 apiece respectively.
Why UBS Cuts Rating On HAL Shares?
The global brokerage downgraded its rating on HAL from BUY to NEUTRAL for two reasons. Firstly, the brokerage believes HAL's performance has already priced its near-term drivers, and secondly, its major orders timelines are longer.
Explaining in detail, the broker's note highlighted that HAL's share price has already factored in the near-term catalysts such as the resolution of the GE F404 engine delay and orders for the Light Combat Helicopter and LCA MK1A fighter aircraft.
Also, the broker lowered its estimate of HAL's order book compound annual growth rate (CAGR) to 14% from the earlier 21% for financial years 2026 to 2028. This is based on HAL's updated guidance on the timelines for the delivery of the Su-30 MKI fighter aircraft upgrade and the LCA Mark 2 order.
Despite the above, UBS raised its target price on HAL to Rs 5,600 from earlier Rs 5,440, owing to strong guidance on margins and ramp-up in manufacturing which is expected to provide support against downside risks.
"We believe HAL's execution on the deliveries of Tejas Mk1A aircraft will be a key monitorable in the coming quarters," said, Amit Anwani, Research Analyst, at PL Capital in a note.
According to the PL analyst's note, HAL's long-term outlook remains intact on the growing strength & modernization of India's air defence given 1) it is the primary supplier of India's military aircraft, 2) long-term sustainable demand opportunity owing to the government's push on indigenous procurement of defence aircraft, 3) a robust order book with a 2-year pipeline of Rs1.0trn+, 4) leap in HAL's technological capabilities due to development of advanced platforms (Tejas, AMCA, GE-414 & IMRH engines, etc.), and 5) improvement in profitability via scale & operating leverage. The stock is currently trading at a P/E of 40.5x/37.3x on FY26/27E earnings.
During the fourth quarter of FY25, HAL's share price dropped by 7.7% to Rs 3,977 crore, compared with Rs 4,309 crore in Q4FY24. On other hand, HAL registered a whopping 176% growth from net profit of Rs 1,440 crore in Q3FY25. Consolidated revenue from operations also dipped 7.2% to Rs 13,700 crore in Q4FY25, from Rs 14,769 crore in Q4FY24, but advanced by 97% from Rs 6,957 crore in Q3FY25.
Established in 1940, Hindustan Aircraft Limited (HAL) operates as an aerospace and defence company. The company uses international design, under licence, to build and assemble aircraft and engines such as Prentice, Vampire and Gnat. It also designs and develops domestic aircraft. The company, in collaboration with the Inter-Continental Aircraft Company of USA, commenced its business of manufacturing Harlow Trainer, Curtiss Hawk Fighter and Vultee Bomber Aircraft. The company's three key products include Su-30 MKI Aircraft, LCA Tejas Aircraft and Dhruv - Advance Light Helicopter (ALH), as per IBEF.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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