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Analysts predict up to 38% gains in this defence PSU after Q1; do you own?
Despite a slight dip in net profit, the defence PSU's solid operational performance and upbeat guidance from brokerages have fuelled bullish sentiment, with some analysts projecting as much as 38 per cent upside from current levels.
HAL Q1 results
HAL posted a 4.11 per cent year-on-year (Y-o-Y) decline in net profit at ₹1,377 crore in Q1FY26, compared to ₹1,436 crore in the same quarter last year (Q1FY25). However, revenue rose 10.8 per cent Y-o-Y to ₹4,819 crore, indicating steady execution despite a modest revenue miss.
Operationally, HAL delivered a standout performance. Ebitda surged 29.2 per cent Y-o-Y to ₹1,284.3 crore, while Ebitda margins expanded sharply to 26.7 per cent from 22.86 per cent in Q1FY25. The beat was led by higher gross margins and reduced provisions, offsetting the slight top-line miss and resulting in a stronger-than-expected bottom line. Track Stock Market LIVE Updates
What are analysts saying about HAL Q1 results?
Japan-based brokerage Nomura maintained its 'Buy' rating with a target price of ₹6,100, implying around 38.4 per cent upside. The brokerage noted HAL's Ebitda beat of 16-17 per cent over estimates and praised the robust 24x book-to-bill ratio in its manufacturing segment.
With execution timelines on or ahead of schedule and minimal downside risk, analysts at Nomura expect a 24 per cent PAT CAGR over FY25-28F. HAL's strong indigenisation efforts, cost controls, and R&D investments were also flagged as key positives.
Motilal Oswal, too, remained upbeat, saying, 'HAL reported a decent quarter with a slight miss on revenue, which was offset by better-than-expected margins and higher other income. This resulted in a beat at the PAT level.'
Analysts at Motilal Oswal remain optimistic about future deliveries, particularly with engine supplies from GE for the Tejas Mk1A ramping up. Thus, the brokerage retained a 'Buy' rating and revised its target price to ₹5,800, based on 32x Sep'27E earnings, citing the stock's attractive 31x/27x P/E valuation on FY26/27E earnings.
Nuvama was also bullish, stating, 'HAL reported a better-than-expected Q1FY26 result driven by strong execution lifting operating profit margin (OPM) to 26.7 per cent, beating Street's 23 per cent estimate.' With a massive ₹1.84 trillion order book and a ₹4.6 trillion pipeline over the next 7-8 years, Nuvama sees strong long-term growth. Analysts expect a 21 per cent revenue CAGR over FY25-28E and maintain their 'Buy' call with a target price of ₹6,000, implying a 35 per cent upside from current levels.
Morgan Stanley, while more conservative, reportedly acknowledged HAL's strong Q1 showing with a beat on Ebitda and PAT. However, it maintained an 'Equal-weight' rating with a target price of ₹5,092.
What's next for HAL?
With India's defence modernisation gathering pace, HAL stands to benefit majorly – especially amid a critical shortfall in the Indian Air Force's fighter squadron strength (currently ~31 squadrons versus a sanctioned 42). The ramp-up of Tejas aircraft deliveries and finalisation of additional orders provide strong visibility into future revenue and earnings.
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