HAL vs Data Patterns: Why Goldman Sachs sees 27% upside in one but downgrades the other 

Goldman Sachs also said the Street remained overly focused on Tejas Mk1A deliveries and was not fully factoring in other manufacturing programmes that could support Hindustan Aeronautics’ earnings over the next few years.

Goldman Sachs on Hindustan Aeronautics: ‘Buy’

Goldman Sachs upgraded Hindustan Aeronautics to ‘Buy’ with a target price of Rs 5,870, implying an upside of 27%. The brokerage said its view changed because execution risks that had weighed on the stock for nearly two years were beginning to recede, while earnings expectations remained conservative relative to the opportunities emerging across multiple defence platforms.

The brokerage said its revised estimates incorporated higher manufacturing revenue and earlier deliveries of several key platforms. It raised its financial year 2027 revenue estimate by 9% and financial year 2028 revenue estimate by 23% after advancing expected deliveries of the HTT-40 trainer aircraft, Light Combat Helicopter Prachand and Su-30 platforms by one year based on channel checks and supply chain activity.

Although Goldman Sachs trimmed earnings before interest, taxes, depreciation and amortisation margin estimates because manufacturing carried lower margins than repair and overhaul work, it still raised its 12-month target price to Rs 5,870 from Rs 5,545.

Goldman Sachs said, “We expect execution to pick-up from Q2FY27 after a nearly two-year delay in delivering the Tejas Mk1A fighter jet.” It also said, “Street consensus earnings appear to be still overly concentrated on prospects for the LCA Tejas Mk1A platform and do not appear to reflect other impending platform deliveries.”

According to the brokerage, channel checks indicated that GE Aerospace was likely to streamline deliveries of F404 engines during the second half of financial year 2027, removing one of the biggest bottlenecks for Hindustan Aeronautics. It also expected deliveries of HTT-40 trainer aircraft from financial year 2027 and Light Combat Helicopter Prachand from financial year 2028 to broaden the company’s earnings base instead of relying solely on Tejas Mk1A. Goldman Sachs said its earnings estimates remained above consensus for financial years 2027 to 2029 because it incorporated revenue from these programmes earlier than the broader market.

Goldman Sachs on Data Patterns: ‘Neutral’

Goldman Sachs downgraded Data Patterns to ‘Neutral’ with an unchanged target price of Rs 4,165, implying a 6% downside. The brokerage said the stock had already reached its target after delivering strong returns since coverage was initiated, leaving limited room for further re-rating despite healthy earnings growth.

The brokerage noted that Data Patterns had returned 69% since its initiation report in October 2025 and was trading at the upper end of its historical valuation range. While it continued to like the company’s intellectual property-led business model and earnings trajectory, Goldman Sachs believed fresh catalysts were limited over the near term. It also expected margins to remain healthy but saw constrained upside as the revenue mix gradually shifted towards defence public sector undertakings, where profitability was comparatively lower than contracts from the Ministry of Defence and the Defence Research and Development Organisation.

Goldman Sachs said, “Data Patterns (DP) stock has performed strongly since our initiation on Oct. 2, 2025, yielding a return of 69%.” It added, “In view of limited near-term catalysts, we downgrade Data Patterns to Neutral (prior Buy) with an unchanged TP of INR 4,165/sh.”

The brokerage also pointed out that the company’s order book had remained range-bound over recent quarters, with the book-to-bill ratio falling below one because of robust execution. While management indicated that the order book stood at around Rs 26.5 billion, including negotiated orders pending receipt, Goldman Sachs believed visibility on incremental order inflows from defence public sector companies remained relatively low. It also said its earnings estimates were below consensus for financial years 2027 through 2029 because it expected lower revenue growth and earnings before interest, taxes, depreciation and amortisation margins than the broader market.

Why Goldman Sachs now prefers Hindustan Aeronautics over Data Patterns

Goldman Sachs said the balance of risk and reward had shifted decisively in Hindustan Aeronautics’ favour after nearly 10 months of coverage. It believed execution challenges that previously justified a cautious stance were easing, while the market continued to underappreciate earnings contributions from programmes beyond Tejas Mk1A. By contrast, Data Patterns had already delivered substantial share price gains and was trading at rich valuations despite limited near-term triggers.

The brokerage also said execution risks at Hindustan Aeronautics were receding, while consensus earnings still did not fully reflect the company’s broader manufacturing pipeline. For Data Patterns, Goldman Sachs believed valuation already captured much of the company’s strong earnings trajectory, making further upside difficult without a meaningful acceleration in order inflows.

Conclusion

Goldman Sachs’ latest review marked a notable change in its stance on India’s listed defence manufacturers. The brokerage upgraded Hindustan Aeronautics after concluding that execution was beginning to improve and that the market was overlooking multiple production programmes beyond Tejas Mk1A. At the same time, it turned more cautious on Data Patterns after the stock’s sharp rally, saying its strong operating performance was largely reflected in valuations while fresh catalysts remained limited.

Disclaimer: The investment views, target prices and brokerage ratings mentioned in this article are sourced from third-party research reports and do not constitute direct financial advice, an offer or a solicitation to buy or sell any securities. Equity investments are subject to market risks, and past performance or analyst projections do not guarantee future returns. Readers should conduct their own due diligence and consult a Securities and Exchange Board of India (SEBI)-registered financial adviser before making any investment decisions.