Defence stock at 14% discount: Here’s why brokerages are bullish, see up to 34% upside

Shares of Hindustan Aeronautics Limited fell over 3 per cent on Friday even after the state-run defence company reported a rise in profit for the March-ended quarter.

The company posted a consolidated net profit of Rs 4,196 crore for the fourth quarter of FY26, registering a 6 per cent year-on-year (YoY) increase from Rs 3,977 crore reported in the corresponding quarter last year.

Revenue from operations stood at Rs 13,942 crore during the January-March quarter, up 2 per cent from Rs 13,700 crore reported a year ago.

On a sequential basis, the company reported a sharp jump in earnings. Net profit more than doubled from Rs 1,867 crore reported in the December quarter, while revenue from operations surged over 81 per cent from Rs 7,699 crore.

HAL also reported a more than 5 per cent increase in total income to Rs 15,093 crore in Q4FY26. Total expenses rose over 4 per cent YoY to Rs 9,522 crore during the quarter.

HAL Share Price

Despite the earnings growth, HAL shares came under selling pressure on Thursday. The stock was trading at Rs 4,450 on the BSE at around 9:35 AM, down Rs 158 or 3.43 per cent from the previous close.

Hindustan Aeronautics Limited shares have corrected in recent months after hitting a 52-week high of Rs 5,165 on May 16, 2025. The stock is currently trading around Rs 715, or nearly 13.8 per cent, below its one-year peak level.

However, the share has recovered strongly from its 52-week low of Rs 3,479.10 touched on March 30, 2026. At the current market price of Rs 4,450, the stock is up around Rs 971, or nearly 28 per cent, from its one-year low.

However, HAL has delivered strong long-term returns to investors. The stock has gained over 196 per cent in the last three years and more than 810 per cent in the past five years.

The company currently has a market capitalisation of over Rs 2.98 lakh crore and is part of the Nifty Next 50 index. HAL operates in the aerospace and defence sector and remains one of India’s key defence manufacturing companies.

Goldman Sachs remains cautious

Brokerage Goldman Sachs maintained its “Neutral” rating on HAL after the quarterly results. The brokerage slightly reduced its target price to Rs 5,225 from Rs 5,255 earlier.

Based on the current market price of Rs 4,450, the revised target price indicates an upside potential of around 17 per cent. Goldman Sachs said HAL continues to have a robust order book but added that execution and manufacturing activity remain areas of concern.

The brokerage noted that EBITDA margin during the quarter remained lower because of higher-than-expected other expenses and capitalised expenses. It also highlighted that provisions declined by 88 per cent year-on-year, which, according to the brokerage, points to subdued manufacturing activity during the March quarter.

Goldman Sachs further said that deliveries of Tejas Mk-1A aircraft would remain an important trigger for future stock performance.

Nomura sees stronger upside potential

Meanwhile, brokerage Nomura maintained a positive view on HAL and retained its “Buy” rating on the stock. Nomura fixed a target price of Rs 5,954 on HAL shares. Compared with the current market price of Rs 4,450, the target implies an upside potential of nearly 34 per cent.

The brokerage said HAL’s Q4FY26 performance was better than expected at the operating level. It also highlighted strong order inflows during FY26 and said the company’s balance sheet continued to improve.

FY26 performance remains strong

For the full financial year ended March 31, 2026, HAL reported a nearly 9 per cent rise in consolidated net profit to Rs 9,116 crore, compared with Rs 8,364 crore in FY25. The company’s annual revenue increased around 7 per cent to Rs 33,089 crore from Rs 30,981 crore in the previous financial year.

Earnings per share (EPS) during the March quarter rose nearly 6 per cent to Rs 62.57. For the full financial year, EPS increased more than 9 per cent to Rs 135.71. The company’s overall net worth also improved significantly during FY26. HAL said its net worth rose 17 per cent to Rs 40,862 crore.

Market participants said the company continued to benefit from strong demand in the defence and aerospace sector, supported by government focus on domestic manufacturing and defence procurement.