Domestic brokerage JM Financial has initiated coverage on Hindustan Aeronautics Limited (HAL), assigning a 'Buy' rating and setting a target price of ₹4,875. This target reflects a potential upside of over 20% from the current price of ₹4,033. HAL, India's largest public sector aerospace and defence company, is poised to benefit from significant demand for aircraft as the Indian Air Force (IAF) faces capability gaps due to a declining squadron strength. The IAF has only inducted two types of aircraft from 1987 to 2014, leading to a current strength of around 29 squadrons, well below the required 42. Analysts expect a strong push towards upgrading existing platforms and introducing new programmes like the Medium Fighter Replacement Aircraft (MFRA) and Advanced Medium Combat Aircraft (AMCA).

Additionally, JM Financial highlights a projected ₹9 trillion opportunity in air defence capital expenditure over the next 6-7 years, driven by a 20% CAGR in government spending on capital acquisition. HAL is expected to see strong revenue growth, with projections indicating a 21% CAGR from FY26 to FY28. However, potential risks include delays in order finalization and increased competition from private players.