Broker’s call: Hind Aeronautics (Buy)

Hindustan Aeronautics Limited (HAL) reported a robust Q1-FY27 performance, with revenue rising by around 14.4% year-over-year, primarily driven by better execution. The company's EBITDA margin improved by 107 basis points year-over-year to 27.7%, thanks to a reduction in non-operating expenses. HAL is strengthening its position in India's defense and aerospace sector, backed by significant order opportunities worth roughly ₹90,000 crore in the next two years across various projects such as ALH helicopters, Su-30 upgrades, Dornier aircraft, and engine manufacturing programs.

The delivery of the LCA Mk1A is expected to become more predictable as GE engine supplies stabilize, with management aiming to produce around 24+ aircraft annually in the coming years. HAL has planned cumulative investments of approximately ₹12,000 crore by 2030, targeting capacity expansion, aero-engine infrastructure, and next-generation platforms to support higher production rates and greater localization.

The company's strong order visibility, improving LCA execution, investment plans, and rising indigenization position it favorably for sustained long-term growth. The buy rating on HAL stock, valuing it at a PE ratio of 36x for the March 2028 earnings (down from 35x earlier), is primarily based on the expectation that improved GE F-404 engine availability will lead to a ramp-up in LCA Mk1A deliveries, with HAL targeting production of 24+ aircraft annually. This revision has resulted in a revised target price of ₹5,795 (previously ₹5,423).