Hindustan Aeronautics Ltd.: HAL shares are the cheapest pure-play defence stock in India, CLSA states despite recent concerns

Hindustan Aeronautics Ltd. Update Hindustan Aeronautics Ltd. (HAL) shares opened higher, breaking a two-day losing streak, as CLSA maintains an 'Outperform' rating with a price target of ₹5,436 per share. This target suggests a potential upside of 38% from the previous closing price. Despite being excluded from India's fifth-generation fighter development program, HAL is projected to secure orders worth $33 billion from FY25 to FY30, driven by anticipated repeat helicopter orders and the recently approved Super Sukhoi upgrade program.

Key Developments for Hindustan Aeronautics Ltd.

• HAL's order backlog surged 88% year-on-year in FY25, expected to reach $28 billion by FY27, indicating strong demand.
• The government recently approved a $3.6 billion helicopter order, enhancing revenue visibility with execution likely starting in FY27.
• CLSA highlights HAL's robust order pipeline, providing nearly 14 years of revenue visibility, solidifying its position as a leading defense stock.
• The commencement of Mk1A fighter jet deliveries is anticipated in Q2 2026, further boosting HAL's operational outlook.

Business Impact This positive sentiment around HAL reflects its strong order book and government backing, which are crucial for sustaining revenue growth. The anticipated orders and upgrades are likely to enhance HAL's profitability and market position in the defense sector.

Strategic Implications HAL's exclusion from the AMCA 1.0 program does not hinder its competitive edge, as it remains eligible for future bids. The strong order pipeline and government contracts position HAL favorably against competitors, reinforcing its growth strategy.

Market & Industry Context The Indian defense sector is witnessing increased government spending and strategic partnerships, which bodes well for companies like HAL. The focus on indigenous defense production aligns with national priorities, enhancing HAL's market dynamics.

Outlook With a solid order backlog and government support, HAL is well-positioned for sustained growth, making it a key player in India's defense landscape.