In its latest update, ICICI Securities has reiterated its bullish stance on Hindustan Aeronautics Limited (HAL), maintaining a “BUY” rating with a DCF-based target price of Rs 5,000 — representing a 20% upside from the current market price of Rs 4,177. The call is underpinned by a record-breaking order inflow in FY25, substantial multi-year revenue visibility, and improved confidence in execution led by upcoming deliveries of GE’s F404 engines. Despite a minor miss on revenue estimates, the firm’s healthy order backlog and anticipated inflows for FY26 firmly anchor long-term investor confidence.

Record-Breaking Orders Bolster Long-Term Revenue Visibility

HAL clocked a historic order inflow of Rs 1,195 billion in FY25 — the highest ever in a fiscal year — reinforcing a multi-year revenue stream with 6x book-to-bill coverage.
The robust figure includes Rs 1,020 billion from manufacturing orders and Rs 175 billion from repair and overhaul (RoH) contracts. Notably, major deals signed this year comprise 156 Light Combat Helicopters (LCH) “Prachand,” 12 Su-30 MKI aircraft, 240 AL-31FP engines, and 40 Do-228 aircraft mid-life upgrades.

This backlog translates into an outstanding order book of Rs 1,840 billion — nearly doubling from Rs 941 billion in FY24 — setting the stage for strong top-line acceleration through FY27.

Delivery Execution to Accelerate on F404 Engine Induction

Near-term execution bottlenecks, including delayed deliveries of the ALH-Dhruv platform, are expected to be alleviated with the commencement of F404 engine supply from GE.
FY25 revenue came in at Rs 304 billion, approximately 6% shy of ICICI’s Rs 322 billion projection, mainly due to execution slippages. However, the commissioning of F404 engines for the Tejas Mk-1A fighter jets is poised to remedy recent delays and drive FY26 revenue growth.

This development is not just critical to HAL’s own delivery schedule, but also sets a cascading benefit for its key supply chain partners, including Bharat Electronics (BEL), Astra Microwave, and Dynamatic Technologies.

FY26 Set to See Rs 1,400+ Billion in New Orders

FY26 order inflow could eclipse Rs 1,400 billion, anchored by three high-ticket projects: LCA Tejas Mk-1A, Su-30 upgrades, and RoH contracts.
Key expectations include:

Rs 670 billion from 97 LCA Tejas Mk-1A aircraft

Rs 600 billion from Su-30 fleet upgrades

Rs 170–180 billion in recurring RoH orders

Given the scale and strategic value of these projects, HAL’s growth narrative remains fundamentally intact for the medium term.

Financials Reflect a Transitory Dip, But Margin Expansion is Projected

FY25 earnings reflect a momentary dip — EBITDA declined 20% YoY — but margins are expected to rebound to over 28% from FY26 onward.

EBITDA: Rs 77.8 billion in FY25 vs Rs 97.4 billion in FY24

PAT: Rs 64.2 billion in FY25 (down 15.7%)

EPS: Rs 96.1, with a strong rebound expected to Rs 185.4 by FY27

The company maintains a lean balance sheet, strong free cash flow outlook (Rs 242.9 billion in FY26), and a projected RoE of 31.7% in FY27 — reflecting robust internal capital generation.

Valuation Still Attractive Amid Broader Defence Spend Theme

At 22.5x FY27E earnings, HAL trades below global and domestic defense manufacturing peers, making the valuation attractive given India’s defense capex upcycle.
The stock has corrected ~6.6% over the past six months, offering a favorable entry point. HAL’s unmatched domestic manufacturing scale, combined with execution stability, makes it a prime beneficiary of India's growing defence budget and ‘Atmanirbhar Bharat’ policy thrust.

Strategic Progress in Tejas Mk-II and AMCA Add Optionality

Ongoing development in advanced platforms like Tejas Mk-II and the fifth-generation Advanced Medium Combat Aircraft (AMCA) represent untapped optionality in the stock.
While these programs may not contribute materially to FY26–27 financials, their strategic value, R&D depth, and long-term order potential add qualitative upside not fully captured in DCF valuations.

Risks: Execution Delays and Raw Material Pressures

Key risks to the thesis include continued delays in Tejas Mk-1A execution, postponed AoN-based orders, and margin pressures from raw material inflation.
HAL’s execution discipline and timely fulfillment of headline orders will remain under close investor scrutiny. However, ICICI Securities maintains that structural tailwinds outweigh tactical headwinds at current levels.

Stock Levels and Investment Call

Current Market Price (CMP): Rs 4,177
Target Price: Rs 5,000 (20% Upside)
Valuation Basis: DCF
P/E (FY27E): 22.5x

Key Support: Rs 3,800 | Resistance: Rs 4,500 | Breakout Level: Rs 5,000+

ICICI Securities recommends investors accumulate the stock on dips with a 12-month horizon. The ideal strategy is to enter near Rs 4,000 with a stop-loss at Rs 3,700 and ride the uptrend toward Rs 5,000–5,200, provided broader market sentiment and execution stay intact.