We believe HAL is a long-term play on the growing strength & modernization of India’s air defence given 1) it is the primary supplier of India’s military aircraft, 2) long-term sustainable demand opportunity owing to government’s push on indigenous procurement in defence, 3) leap in HAL’s technological capabilities due to development of advanced platforms (Tejas, AMCA, etc.), 4) robust order book with further 5-year pipeline of Rs2trn+, and 5) improvement in profitability via scale & operating leverage. The stock is currently trading at a P/E of 32.1x/28.3x on FY25/26E earnings. We roll forward to FY26E and value the stock using an equal-weighted average of DCF-derived price and P/E-derived price based on 28x FY26E (23x Sep-25E earlier). Downgrade to ‘Hold’.
Comments
Post a Comment