CLSA positive on HAL after Q1 margin gains, expects stock to outperform with target price of Rs 5,436
CLSA has maintained its outperform rating on Hindustan Aeronautics Limited (HAL) with a target price of ₹5,436 after the company reported a sharp improvement in margins and profitability in the first quarter of FY26. Profit after tax rose on the back of higher gross margins and lower provisions, while EBITDA jumped 31% year-on-year as margins expanded by 414 basis points.
The company's cash reserves climbed to US$4.5 billion during the quarter, driving a 36% increase in treasury income. CLSA said HAL's long-term business outlook remains strong, with a decadal order pipeline of around US$54 billion. It highlighted the expected large fighter aircraft order in 2025 and greater visibility on General Electric engine deals as key catalysts that could support growth.
However, the brokerage also flagged certain risks, including the potential shift of key aerospace programmes to a public-private partnership model and the challenge of sustaining the current high margin profile. While these risks warrant monitoring, CLSA believes HAL's solid order visibility, strong balance sheet, and near-term catalysts position it well for continued earnings growth, reinforcing its positive stance on the stock.
Disclaimer: The views and recommendations made in this article are those of CLSA. This article does not constitute investment advice. Investors should consult their financial advisors before making any investment decisions.
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