HAL Share: Nomura Gives the Defence Stock a ‘Buy’ Call With Huge Upside Potential

Synopsis: Nomura remains bullish on Hindustan Aeronautics Ltd (HAL), reaffirming it as its top defence pick with a revised target of ₹6,040, implying 40% upside. Strong order book, 25x book-to-bill, LCA catalysts, solid margins, low debt, and consistent profitability support long-term growth

The shares of a Large-Cap company specialising in the design, development, manufacture, repair, and overhaul of aerospace and defence equipment are in focus following Nomura’s Target as it maintains a bullish stance on HAL, reaffirming it as its top defence sector pick.

With a market capitalization of Rs. 2,90,255.04 crores in the day’s trade, the shares of  Hindustan Aeronautics Ltd rose by 0.35 percent, reaching a high of Rs. 4,342.00 per share compared to its previous closing price of Rs. 4,326.45 per share.

What Happened 

Hindustan Aeronautics Ltd engaged in the design, development, manufacture, repair, and overhaul of aerospace and defence equipment, is in focus as Nomura maintains a bullish stance on HAL, reaffirming it as its top defence sector pick. The target price is revised upward to Rs. 6,040 from Rs. 5,954, with an upside potential of 40 percent from the previous close price. Reason for the target

Top pick in the defence sector

HAL continues to be Nomura’s top defence pick, driven by its dominant position in India’s aerospace manufacturing ecosystem. The company benefits from a strong government focus on indigenisation and defence self-reliance. Its diversified aircraft portfolio and monopoly-like positioning in key platforms strengthen long-term revenue stability and strategic importance.

Exceptional order visibility (25x book-to-bill)

HAL’s book-to-bill ratio of ~25x indicates very strong order visibility, ensuring multi-year revenue stability. This massive backlog provides strong growth certainty and reduces execution risk. It reflects sustained demand for fighter aircraft, helicopters, and maintenance contracts, supporting predictable revenue flow and capacity expansion over the medium term.

Conservative FY27 guidance despite strong fundamentals

Nomura believes HAL’s FY27 revenue guidance of 10–12% is conservative given its strong order pipeline. The company also maintains healthy EBITDA margins of 30–31%, indicating operational efficiency. This suggests upside potential if execution accelerates, especially in large programmes like LCA and engine-related contracts.

LCA deliveries as key near-term catalyst

The Light Combat Aircraft (LCA) deliveries are a key catalyst for growth acceleration. While some delays have impacted near-term estimates, production ramp-up remains critical for revenue recognition. Improved execution in LCA orders will directly support earnings growth and strengthen investor confidence in HAL’s manufacturing capabilities.

Strong long-term earnings & margin CAGR outlook

Nomura estimates FY26–29 EPS CAGR of ~19% and EBITDA CAGR of ~20%, driven by rising defence production and a strong execution pipeline. Even after minor EPS cuts (2–3%) for FY27–28 due to delays, long-term growth remains intact, supported by high-margin defence manufacturing and an expanding order book.

Financials & Others

The company’s revenue rose by 1.77 percent from Rs. 13,700 crores in March 2025 to Rs. 13,942 crores in March 2026. Meanwhile, Net profit rose from Rs. 3,977 crores to Rs. 4,196 crores in the same period.

The company shows strong profitability, with a ROCE of 32% and ROE of 24%, indicating efficient use of both total capital and shareholder funds. A 3-year average ROE of 26% further confirms consistent returns over time, which is a positive sign of stable business performance. Its debt-to-equity ratio of 0.00 is especially strong, meaning the company operates with virtually no debt. 

From a valuation perspective, the stock P/E of 31.8 is significantly lower than the industry P/E of 64.3, suggesting the stock may be relatively undervalued compared to peers, assuming growth remains intact. Additionally, a dividend payout of 29.5% indicates a balanced approach, returning profits to shareholders while still retaining enough earnings for reinvestment.

The company has a very strong and rapidly growing order book, which stood at Rs. 1,89,300 crore at the end of FY25, almost doubling from Rs. 94,127 crore in FY24. This growth is impressive even after executing Rs. 30,105 crore worth of work during the year, showing strong new order inflow and execution capability.

A large portion of the order book comes from major manufacturing contracts worth Rs. 1,02,337 crore, including key defence programs such as 240 AL-31FP engines, 156 LCH Prachand helicopters, and 12 Sukhoi-30MKI aircraft. In addition, there are steady contributions from ROH (Rs. 19,271 crore), design & development projects (Rs. 3,180 crore), and export orders (Rs. 493 crore), which together ensure diversification across business segments.

Looking ahead, the company also has a strong pipeline of around Rs. 1 lakh crore expected over the next 1–2 years. This includes major upcoming orders like LCA Mk1A, ALH helicopters, DO-228 aircraft, and upgrades to Dornier platforms, indicating sustained revenue visibility and long-term growth potential.

Hindustan Aeronautics Limited (HAL) is an Indian state-owned aerospace and defence company under the Ministry of Defence. It is one of Asia’s oldest and largest aerospace manufacturers, involved in designing, developing, manufacturing, and maintaining aircraft, helicopters, avionics, and related systems for both military and civilian use. HAL plays a key role in supporting the Indian Armed Forces with indigenous aviation technology.

The company’s major products include fighter jets like the Tejas, trainer aircraft, helicopters such as the Dhruv series, and licensed production of foreign aircraft and engines. HAL also provides maintenance, repair, and overhaul (MRO) services and works closely with organisations like the Defence Research and Development Organisation (DRDO) to advance India’s self-reliance in aerospace and defence manufacturing.

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