Around 600% jump in 5 years: Citi maintains 'buy' on Maharatna defence PSU HAL for up to 28% - Check target, rationale

Detailed summary

HAL shares have weakened recently, but Citi retained its Buy rating and ₹6,175 target, implying about 28% upside. Citi cited higher inventory and support from engines, helicopters and repairs amid delayed Tejas Mk1A deliveries.

Hindustan Aeronautics Ltd (HAL) shares have recently faced selling pressure, with the Maharatna defence public sector undertaking (PSU) stock declining 3.5% in one week, 1% in one month and 3% in three months. However, the stock remained in positive territory over longer periods, gaining 4% in six months and 1% in one year. It also delivered multibagger returns of around 600% over five years.

In the previous trading session, HAL shares fell 0.7% to close at ₹4,809.80. Despite the recent weakness, international brokerage Citi maintained its bullish stance on the defence major, retaining its 'Buy' rating and target price of ₹6,175 per share. The target indicated an upside potential of around 28% from the previous close.

Citi said HAL's Q2 revenue was in line with its estimates, although EBITDA missed expectations due to weaker gross margins. The brokerage added that the company's engines, helicopters and repair work helped offset the delayed Mk1A ramp-up. HAL's inventory also increased 39% year-on-year (YoY), signalling rising preparedness for execution, according to the report.

The Maharatna central public sector enterprise reported its financial results for the July-September quarter during market hours on Thursday.

HAL posted a 16% YoY increase in consolidated profit after tax (PAT) to ₹1,935.64 crore in the second quarter of FY27, compared with ₹1,669.05 crore in the corresponding quarter of the previous financial year.

The defence major's revenue from operations rose nearly 15% YoY to ₹7,613.25 crore in Q2 FY27, against ₹6,628.61 crore reported in the year-ago period. Expenses, meanwhile, increased around 16% YoY to ₹6,132 crore during the quarter under review.

While revenue growth remained in line with Citi's estimates, the brokerage flagged weaker gross margins as the reason for the EBITDA shortfall. The company's engines, helicopters and repair activities provided support amid delays in the Tejas Mk1A delivery ramp-up.

Analysts view rising Tejas Mk1A output…

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