HAL — Investment Research Report April 2026
Hindustan Aeronautics Limited (HAL) is India’s foremost state-owned aerospace and defence company, headquartered in Bengaluru. Incorporated in 1963 — with roots dating to 1940 — it operates as a Maharatna PSU under the Ministry of Defence and holds a near-monopoly over India’s defence aerospace manufacturing.
HAL designs, develops, manufactures, repairs, overhauls, and upgrades a wide spectrum of products: fixed-wing aircraft (Tejas LCA Mk1/Mk1A, Su-30 MKI, Hawk trainer, HTT-40, Dornier 228, Hindustan 228); rotary-wing platforms (Dhruv ALH, Prachand LCH, Light Utility Helicopter, Chetak, Cheetah); aero-engines; avionics (inertial navigation, radar, flight data systems); and space structures for ISRO. It operates 20 production divisions and 11 R&D centres across India (Bengaluru, Nashik, Koraput, Lucknow, Hyderabad, Korwa, Kanpur).
Two business segments drive revenue: Manufacturing (24% revenue share in FY25, up from 19% in FY23) and Repair, Overhaul & Maintenance / ROH (76%). HAL actively supports the government’s Atmanirbhar Bharat initiative, progressively shifting from licensed production toward fully indigenous platform development. Civil aviation currently contributes barely 5% of revenue, but HAL has articulated ambitions to grow this meaningfully over the medium term.
HAL has compounded net profit at a CAGR of approximately 24.5% over the last five years — an impressive track record — while revenue growth has been more modest at ~7.6% CAGR over the same period. The divergence reflects improving margins and operating leverage rather than topline acceleration. FY25 revenue came in flat at ₹30,400 Cr (provisional) largely due to LCA Mk1A engine supply shortfalls and ALH delivery delays following the January 2025 fleet grounding.
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 | Q3 FY26 (YoY) |
|---|---|---|---|---|---|---|
| Revenue (₹ Cr) | 19,474 | 23,993 | 26,928 | 30,381 | 32,846* | 7,699 (+10.7%) |
| Net Profit (₹ Cr) | 2,863 | 4,213 | 5,827 | 7,621 | 8,364 | 1,867 (+29.6%) |
| EBITDA Margin | ~24% | ~26% | ~28% | ~30% | ~31% | ~32% |
| PAT Margin | ~14.7% | ~17.6% | ~21.6% | ~25.1% | ~25.5% | ~24.2% |
| EPS (₹) | 42.8 | 63.0 | 87.2 | 114.0 | 125.0 | 27.9 (qtrly) |
| PAT CAGR (5yr) | ~24.5% | Strong | ||||
*FY25 consolidated audited figure; provisional revenue was ₹30,400 Cr. TTM revenue per Screener: ₹32,846 Cr.
Q3 FY26 (Oct–Dec 2025) was a standout quarter: net profit jumped 29.6% YoY to ₹1,867 Cr on revenue of ₹7,699 Cr (+10.7% YoY), driven by improving execution momentum and operating leverage. For the nine months ending December 2025, cumulative net profit was ₹4,891 Cr (+12.2% YoY), setting up a strong Q4 FY26 given HAL’s traditional back-loading of deliveries. The board declared an interim dividend of ₹35/share (700% on FV ₹5) for FY26 — 40% higher than FY25’s interim payout of ₹25.
Our DCF model projects HAL’s free cash flows over a 10-year horizon using a WACC of 12% and terminal growth rate of 5%. Given HAL’s near-zero debt, government ownership, and assured order pipeline through 2032, we apply a slight discount to WACC versus typical defence PSUs, reflecting high revenue visibility and low financial risk. Revenue growth is modelled at 15–18% CAGR for FY26–FY29 (order book execution + new manufacturing ramp-up) tapering to 8–10% thereafter.
DCF Model — Key Assumptions & Output
Given current market price of ₹3,487 and our DCF-derived fair value of ₹4,800–5,200, HAL offers compelling value for patient investors with a 12–18 month horizon. The stock has corrected ~33% from its all-time high of ₹5,166 (Jul 2024), largely due to sentiment headwinds around AMCA exclusion fears and LCA delivery delays — not fundamental deterioration. We recommend accumulation in the following zones:
Our 12-month price target scenarios reflect three distinct paths based on order execution velocity, GE engine supply resolution, and government defence spending trends:
Investors should consider reducing or exiting positions when valuation becomes stretched beyond what execution quality justifies, or when structural risks materialize. Given sector premium valuations, HAL should be trimmed in the following zones:
Triggers that could force an exit irrespective of price level:
HAL’s growth thesis rests on three structural pillars, all of which remain intact despite near-term execution hiccups.
1. Record Order Book Executing Through 2032. HAL’s confirmed order backlog stands at approximately ₹1,89,000 Crore — roughly 6x FY25 revenue — covering Tejas Mk1A (83 aircraft), LCH Prachand (156 helicopters), Su-30 MKI (12 aircraft + mid-life upgrades), AL-31FP engines (240 units), Dornier-228 MLU, and HTT-40. CLSA projects total orders of $33 billion between FY25 and FY30, with the backlog expected to swell to $28 billion by FY27. This underpins a 15–18% revenue CAGR through FY29.
2. Margin Expansion Continues. Gross margins have improved structurally as the mix shifts toward indigenous manufacturing (higher margin) versus licensed production. EBITDA margin has expanded from ~24% in FY21 to ~32% in FY26. Operating leverage from capacity expansion — HAL invested significantly in manufacturing infrastructure in FY23–FY25 — will continue to reward the P&L.
3. Engine Supply Resolution Imminent. The single biggest constraint on FY26 delivery numbers has been GE’s supply of F404-IN20 engines for Tejas Mk1A. GE has opened an additional manufacturing line and is expected to deliver 20–24 engines in CY26, versus 5 delivered to date. With each Tejas costing approximately ₹300–350 Cr, even 10 additional deliveries could add ₹3,000+ Cr to FY26 revenue. Management has guided for a significantly stronger FY26 overall versus FY25.
| Metric | FY25A | FY26E | FY27E | FY28E |
|---|---|---|---|---|
| Revenue (₹ Cr) | 32,846 | 38,000–40,000 | 46,000–50,000 | 55,000–60,000 |
| Net Profit (₹ Cr) | 8,364 | 10,500–11,500 | 13,000–14,500 | 16,000–18,000 |
| EPS (₹) | 125 | 155–170 | 195–215 | 240–270 |
| P/E at CMP ₹3,487 | 27.9x | ~22x | ~17x | ~13x |
| Revenue CAGR FY25–28E | ~19–22% (Base Case) | |||
Among Indian defence public sector undertakings, HAL stands out for its revenue scale, profit growth, and order book depth. While peers like BDL and BEL trade at significantly higher multiples, HAL’s large order book and associated execution risk justifies a mild valuation discount. CLSA has called HAL “the cheapest pure-play defence stock” in India. At 26x trailing P/E, HAL is materially cheaper than the sector median of ~55x.
| Company | CMP (₹) | Mkt Cap (Cr) | Revenue FY25 (Cr) | PAT FY25 (Cr) | Trailing P/E | ROE (%) |
|---|---|---|---|---|---|---|
| HAL | 3,487 | 2,33,215 | 32,846 | 8,364 | 26.2x | 27.3% |
| BEL (Bharat Electronics) | 401 | ~2,93,000 | ~21,000 | ~3,900 | 53.6x | ~24% |
| BDL (Bharat Dynamics) | 1,097 | ~40,000 | ~2,900 | ~500 | 78.4x | ~18% |
| Mazagon Dock | 2,065 | ~41,600 | ~10,000 | ~1,800 | ~23x | ~35% |
| Data Patterns | 3,035 | ~6,500 | ~600 | ~170 | ~38x | ~22% |
| Sector Median P/E | ~55x | — | ||||
HAL’s P/E discount to sector reflects its large order book (execution risk) and AMCA uncertainty. On a forward basis (FY27E), HAL trades at only ~17x — a significant re-rating opportunity if execution delivers.
Investment Verdict
HAL is India’s irreplaceable defence aerospace company. Its ₹1.89 lakh crore confirmed order book provides extraordinary revenue visibility through 2032, and its profitability trajectory — 24.5% PAT CAGR over 5 years — is exceptional for a PSU of this scale. The stock’s 33% correction from all-time highs is driven overwhelmingly by sentiment (AMCA fears, LCA delivery delays) rather than fundamental impairment.
At CMP ₹3,487, HAL trades at a mere 26.2x trailing P/E — the cheapest major defence stock in India — and at just ~22x FY26E and ~17x FY27E earnings. Our DCF fair value stands at ₹4,800–5,200 on conservative assumptions. The key swing factor is GE’s F404 engine supply ramp in CY26: successful delivery of 20+ engines would catalyse a meaningful re-rating. We rate HAL as ACCUMULATE with a 12-month base-case target of ₹4,800 and a bull-case of ₹5,800.
Key monitorables: Q4 FY26 delivery numbers (Apr–Jun 2026), official AMCA communication, GE engine delivery count, FY27 defence budget utilisation rate.
Disclaimer: This report is for informational and educational purposes only and does not constitute financial advice, investment solicitation, or a recommendation to buy or sell any security. The analysis reflects the author’s independent research based on publicly available information as of 01 April 2026. Equity investments are subject to market, execution, regulatory, and geopolitical risks. Past performance is not indicative of future results. Readers should conduct their own due diligence and consult a SEBI-registered investment advisor before making investment decisions. The author may or may not hold positions in the securities discussed. This report is not affiliated with or endorsed by Hindustan Aeronautics Limited, BSE, NSE, or any regulatory authority.
