Choice Equity Broking has reiterated its BUY recommendation for Hindustan Aeronautics (HNAL), projecting remarkable growth prospects and operational resilience for investors. The research report sets a 12-month target price of Rs 5,570, suggesting potential upside amidst sectoral tailwinds and improving fundamentals. HNAL’s Q2FY26 performance reflects dynamic progress, robust order-book strength, and key advancements in engine supply, despite short-term margin headwinds. Below, each thematic headline summarizes the latest findings, key levels for the stock, and actionable guidance for equity market participants.

Executive Summary

HNAL sustains strong momentum, with revenue up by 10.9% YoY in Q2FY26 to Rs 66.3 billion and net profit surging 10.5% over last year. Despite margin compression caused principally by elevated provisioning, management confidence remains high on the medium-term earnings trajectory. Sector fundamentals are considered attractive, and engine procurement bottlenecks are starting to ease, bolstering investor optimism. The stock currently trades at Rs 4,748, with an expected dividend yield of 1.1%.

Key Recommendation and Market Sentiment

Choice Equity Broking maintains a BUY stance for Hindustan Aeronautics, citing long-term sectoral positivity and undiminished institutional confidence. The brokerage values HNAL at 35x FY27-28E EPS, aligning with historical PE bands and sector comparatives. The large-cap rating methodology expects a strong 15% or higher upside for the security in the next 12 months—an optimistic attribute rarely seen in defence-sector equities during margin adjustments.

Stock Price Levels and Investment Targets

HNAL’s current market price: Rs 4,748, Target price: Rs 5,570—Key support levels in the Rs 4,300–Rs 4,500 zone, resistance at Rs 5,160–Rs 5,570. These levels reflect both technical and fundamental cues, shaped by historical 52-week high and volume trends. Investors are urged to use Rs 4,300 as a risk-management stop-loss for short-term trades and Rs 5,570 as the primary upside target, anchored by sectoral recovery and internal growth catalysts. Below is a quick HTML reference of technical zones:

Operational Highlights and Financial Insights

HNAL’s quarterly revenue growth surpassed expectations, but EBITDA margin slipped to 23.5%, contracting 394 basis points year-on-year due to higher provision charges. PAT margin ticked down to 25.2%, still reflecting substantial bottom-line strength. The sequential acceleration in operational output—driven by Nashik and Bengaluru capacity expansions—continues to reinforce investor sentiment. Estimated revenue CAGR for FY25-28 stands at 11.2%, PAT CAGR at 10.8%.

Order Book Strength and Sectoral Outlook

Robust multi-year order book, now at 7.1x FY25 revenue, ensures revenue visibility and future margin normalization. HNAL benefits from resumed GE F404 engine supplies and a new contract for delivery of 113 additional engines, decisively reducing execution risk for upcoming years. Sector outlook remains structurally positive, with defence manufacturing capex and government incentives playing pivotal roles.

Management Perspective and Future Catalysts

Management anticipates stronger performance in the second half of FY26, citing operational ramp-ups and ongoing program launches as key growth catalysts. Investors should monitor progress of Tejas Mk1A delivery, as this remains a critical variable for next-phase topline expansion. Sustained R&D investment is expected to drive technological leadership and shareholder value creation. Promoter holding is stable at 71.64%, with FII and DII participation rising incrementally.

Valuation Metrics and Performance Ratios

HNAL trades at a forward PE of 35.2x FY26E and 27.9x FY28E, with price-to-book ratios compressing as earnings compound. Return on equity is projected at 23.9% for FY26, and leverage remains modest, underpinning balance sheet stability. The company leads its sectoral index by a wide margin, with 1-year and 3-year returns eclipsing the BSE 200 index’s performance. A comparative snapshot is illustrated below:

Actionable Guidance for Investors

Investors should consider accumulating HNAL on any pullback towards Rs 4,300, holding for a medium-term price objective of Rs 5,570. Maintain adequate margin-of-safety by setting trailing stops just below key support levels and regularly reviewing sector and company-specific updates. The next earnings season and subsequent order flow developments will serve as potent triggers for price appreciation and risk recalibration.