The share price of Hindustan Aeronautics has plunged over 3.5% in trade today. This is despite the company reporting  stronger-than-expected Q4 earnings.

This is because the defence sector major saw a contraction in EBITDA margin. It contracted 230bp YoY to 36.3%, higher than estimates by most brokerages.

Nomura positive on HAL

However, most brokerages are betting on the long-term perspective. International brokerage house Nomura maintained its positive stance on the stock and retained a ‘Buy’ rating with a target price of Rs 5,954. This indicates an upside potential of around 29% from the current market price.

The brokerage believes the company’s improving profitability, large order book and strong balance sheet continue to provide long-term revenue visibility.

ALSO READ

Let’s take a look at the key reason why the brokerage house is bullish on this stock and the rationale behind it –

Strong quarter driven by operational performance

Hindustan Aeronautics reported revenue of Rs 13,940 crore in Q4FY26. However, the reported number included a one-time accounting impact of Rs 110 crore related to Offset Credit Benefits.

After adjusting for the one-off item, the company’s revenue stood at Rs 13,830 crore, which was around 1% higher compared to last year and also ahead of market estimates.

Nomura stated, “Adjusted EBITDA beats our/consensus estimates by 19%/7%.”

The company’s adjusted EBITDA stood at Rs 4,900 crore during the quarter, while adjusted Profit After Tax came in at Rs 4,030 crore, up around 2% on a year-on-year basis.

According to the brokerage report, lower employee costs and reduced other expenses helped support margins during the quarter despite pressure from project mix and execution stages.

The Adjusted EBITDA margin stood at 35.5%.

Another major support came from treasury income. Other income during the quarter rose sharply by 77% year-on-year to Rs 1,150 crore.

Order book strengthens long-term visibility

One of the biggest positives highlighted by Nomura was Hindustan Aeronautics’ strong order backlog.

As per the brokerage report, the company’s total order backlog stood at around Rs 2.54 lakh crore as of March 2026, which is nearly eight times its trailing twelve-month sales.

Nomura noted, “A strong order backlog of Rs 2.54 lakh crore with a book-bill ratio of 8x, provides ample revenue visibility.”

The company secured several major defence orders during Financial Year 2026. 

These include the supply of 97 Light Combat Aircraft Mk-1A to the Indian Air Force with a total order value of around Rs 62,400 crore.

Apart from fighter aircraft, Hindustan Aeronautics also received orders for Dhruv Next Generation helicopters, Dornier-228 aircraft for the Indian Coast Guard and Advanced Light Helicopters for maritime operations.

Cash position and balance sheet improve further

Nomura also highlighted improvement in the company’s balance sheet and cash generation during the quarter.

According to the brokerage report, cash and cash equivalents stood at around Rs 46,200 crore at the end of FY26, a 21% increase compared to the previous year.

Operating cash flow during the year remained healthy at around Rs 10,920 crore.

The brokerage also pointed out that working capital performance improved further, supported by higher customer advances received during the year.

What investors are now watching closely

Nomura believes valuation still remains reasonable compared to historical levels.

According to the brokerage report, the stock is currently trading at around 23 times estimated FY28 earnings per share, compared to its five-year average one-year forward Price-to-Earnings ratio of around 26 times.

Nomura stated, “We value the stock at 30x FY28 EPS and maintain ‘Buy’.”

For investors, the upcoming management commentary and future order execution timelines may now become the next key trigger for the stock.

Disclaimer: The investment details and brokerage targets mentioned above are for informational purposes only and do not constitute a formal recommendation or solicitation to buy or sell securities. As stock market investments are subject to market risks, readers are strongly advised to consult a SEBI-registered investment advisor before making any financial decisions. The views expressed by brokerage houses are their own and do not necessarily reflect the editorial stance of this publication.

This disclaimer has been generated using AI to support user well-being and responsible content consumption.