Risk-reward seems favourable at this stage
Hindustan Aeronautics Limited (HAL) is India’s largest defence PSU and the sole indigenous manufacturer of defence aircraft in India. We value Hindustan Aeronautics at 29x FY28 EPS of INR 168 to arrive at our TP of INR 4,875. We value it at its post-Covid historical average of 29x given potential risks to order prospects translating into order inflows, and execution dependence on other vendors for critical supplies. However, with the stock correcting 22% in the last six months versus 8% decline in the Nifty, it seems to price in most of the headwinds. Thus, risk-reward seems favourable at this stage. Hence, we initiate at BUY with a TP of INR 4,875, offering 25% upside from current levels.
