Shares of Hindustan Aeronautics Limited (HAL) witnessed a significant decline of over 6% during early trading on Thursday, marking the second consecutive session of losses. This downward movement followed reports indicating that the state-owned defence giant has been excluded from the prestigious Advanced Multirole Combat Aircraft (AMCA) program, which aims to develop India's next-generation stealth fighter jets.
Market Reaction and Price Movement
The defence public sector undertaking (PSU) stock plummeted by as much as 6.28% to reach ₹3,952.00 per share on the Bombay Stock Exchange (BSE). This decline extends the recent slump, with HAL shares having fallen more than 11% over just two trading sessions. By mid-morning, the stock was trading 5.97% lower at ₹3,965.00 apiece.
Analyst Perspectives on AMCA Exclusion
Market analysts have largely viewed this development as negative for Hindustan Aeronautics, though many had anticipated such an outcome. The company's substantial existing order book, estimated at approximately seven times its revenue, coupled with delays in delivering the Light Combat Aircraft Mark 1A (LCA Mk1A), contributed to this expectation.
Krishna Doshi, Defence Analyst at Ashika Institutional Research, highlighted potential risks arising from increased competition from private sector players. "This could lead to margin erosion for HAL moving forward," Doshi noted, adding that the timing is particularly challenging given the company's slow execution pace on current orders, especially the Tejas Mk1A program, which faces dependencies on imported components.
Brokerage Firm Actions and Ratings
Morgan Stanley Downgrade
In a significant move, global brokerage firm Morgan Stanley downgraded HAL shares from Equalweight to Underweight. The firm substantially reduced its price target from ₹5,092 to ₹3,355 per share, suggesting a potential downside of over 20% from Wednesday's closing price.
Morgan Stanley cited multiple concerns, including heightened private sector competition and persistent execution challenges due to high import dependence. The brokerage also lowered its earnings per share (EPS) estimates by 2% and 5% for fiscal years 2027 and 2028 respectively.
JPMorgan's Contrasting View
Contrasting with Morgan Stanley's pessimistic outlook, JPMorgan maintained a more optimistic stance. While acknowledging that HAL's exclusion from the AMCA program represents a negative development, the firm emphasized that this was largely anticipated.
JPMorgan pointed to HAL's substantial opportunity to secure large orders outside the AMCA program and noted that after the recent price correction, the stock's valuations appear attractive. The brokerage has recommended an 'Overweight' rating with a price target of ₹6,004 per share.
Antique Stock Broking's Assessment
Antique Stock Broking acknowledged that while the AMCA program would have strengthened HAL's already robust order book, multiple other large-ticket opportunities remain available. These include the Tejas MKII, SU-30 upgrades, SU-57, Indian Multi-Role Helicopter (IMRH), and Light Utility Helicopter (LUH) programs.
The brokerage firm also highlighted HAL's diversification strategy into civil aerospace, aiming to scale this segment to 25% of revenue over the next decade. Antique maintains a 'Buy' recommendation with a target price of ₹5,841 per share, valuing the company at 35 times its estimated FY28 earnings per share.
Technical Analysis Perspective
Anshul Jain, Head of Research at Lakshmishree Investments, provided a technical assessment of HAL's stock movement. "The share price has decisively broken below the critical base near ₹4,133 with a bearish gap-down, confirming a resumption of selling pressure across timeframes," Jain observed.
He noted that this breakdown has damaged the prior consolidation structure, with the stock now trading below key short-term moving averages, indicating trend weakness. Volume expansion during the decline suggests institutional distribution rather than panic selling.
Jain identified immediate downside support near ₹3,807, but cautioned that any weak bounce toward broken support levels would likely attract fresh selling pressure. The technical structure opens room for further decline toward the ₹3,350 support band unless the stock quickly reclaims the ₹4,133 level.
Long-Term Performance Context
Despite recent setbacks, HAL shares have demonstrated remarkable long-term performance. The stock has delivered multibagger returns of 682% over five years and has gained over 35% in the past two years. However, shorter-term performance shows declines of over 12% in one month, more than 15% in three months, and 13% over six months.
The contrasting analyst views reflect the complex dynamics facing India's premier aerospace and defence company as it navigates increased competition, execution challenges, and evolving defence procurement priorities while maintaining its position as a critical player in India's indigenous defence manufacturing ecosystem.
