Posted on April 1, 2025, by Niftynews
HAL shares saw a significant boost following a positive surprise from UBS, which raised its target for the stock and forecasted a 30% upside after the Indian government cleared an order worth Rs 62,700 crore for 156 Prachand light combat helicopters. This new order came ahead of expectations and represents a strong growth opportunity for HAL shares.
UBS’s Positive Surprise and Target Revision for HAL Shares
UBS had originally projected the order value to be around Rs 45,000 crore, with the expectation that the order would be awarded in Q1FY26. However, the actual order size of Rs 62,700 crore exceeded these projections and was awarded earlier than anticipated, prompting UBS to raise its target for HAL shares. UBS now sees HAL shares reaching a price of Rs 5,440, up from the earlier target of Rs 4,800, representing a 13.33% increase. This new price target suggests a 30.26% upside from current levels for HAL shares.
UBS has also raised its 12-month forward price-to-earnings (PE) ratio for HAL to 35 times from 32 times, while maintaining a 10% discount compared to BHEL. Despite the increase in its target, UBS continues to view HAL shares as its preferred pick within the broader industrial sector.
Prachand Order Execution and Impact on HAL Share’s
The Prachand light combat helicopter order is expected to be executed over the next five years, with HAL starting production in the third year following the award. The financial impact from this order will likely begin to reflect in the P&L statements starting at the end of FY28. With HAL’s capacity to produce 30 LCHs annually, the company is well-positioned to meet the expected demand, which should provide strong revenue growth and a positive impact on HAL shares in the coming years.
Moreover, the Prachand helicopters will feature 65% indigenous content, which not only enhances HAL’s market position but also strengthens India’s domestic defence manufacturing ecosystem. This move aligns with India’s push for greater self-reliance in defence production.
Defence Sector Outlook and HAL Shares
UBS remains optimistic about the future of HAL shares and the broader Indian defence sector. The FY26 period is expected to mark a key inflection point for defence ordering, and recent moves to accelerate procurement decisions, including the Prachand order, have boosted confidence. UBS believes that concerns regarding a slowdown in government capital expenditure affecting defence spending are misplaced, and the demand for HAL share’s will continue to grow as defence spending picks up.
UBS also notes that Fifth Generation Fighter Aircraft (FGA) procurement via Foreign Military Sales (FMS) is unlikely to have a material impact on HAL’s total addressable market. The Prachand order, however, adds significant strength to HAL shares by bolstering its order book in the short and medium term.
Key Takeaways:
- HAL shares surged after UBS raised its target price to Rs 5,440, forecasting a 30% upside.
- The Rs 62,700 crore Prachand helicopter order exceeded expectations and is expected to be executed over five years, with production capacity of 30 LCHs annually.
- The Prachand helicopters will feature 65% indigenous content, boosting HAL’s position in India’s defence manufacturing ecosystem.
- UBS maintains that HAL shares will benefit from an acceleration in defence procurement, with FY26 seen as a turning point for defence ordering.
Conclusion
The Rs 62,700 crore order for Prachand light combat helicopters is a significant win for Hindustan Aeronautics Ltd (HAL), and the HAL shares have reacted positively to this development. UBS’s revision of its target to Rs 5,440 signals strong growth potential, with an anticipated 30% upside for HAL share’s. As the Indian defence sector continues to ramp up procurement, HAL shares are well-positioned for further gains, especially with the indigenous content in Prachand helicopters adding value to both the company and the country’s defence capabilities.
