Stock Ideas: Kotak Securities Bullish on HAL and Another Top Pick

Kotak Securities Highlights HAL and Honasa Consumer as Top Stock Picks

Analysts at Kotak Securities are optimistic about Hindustan Aeronautics Ltd and Honasa Consumer, citing strong growth prospects and robust financial performance.

Hindustan Aeronautics Ltd: A Leader in Aerospace and Defence

Hindustan Aeronautics Ltd (HAL) stands out as India’s premier aerospace and defence manufacturer, boasting a diversified portfolio that spans aircraft and helicopter manufacturing, engines, avionics, and lifecycle support. The company’s integrated capabilities across the aerospace value chain are crucial competitive differentiators, allowing for recurring revenue opportunities and a substantial order book.

As of FY26, HAL’s order book has surged to ₹2.55 lakh crore, nearly quadrupling over the past decade. This robust order book provides revenue visibility for approximately 7-8 years. In FY26 alone, HAL secured manufacturing contracts worth ₹69,600 crore and repair and overhaul contracts worth ₹17,300 crore, underscoring sustained demand across its manufacturing and aftermarket businesses. Furthermore, a prospective order pipeline of ₹4.6 lakh crore, which includes major programs such as Tejas Mk2 and Indian Multi-Role Helicopter (IMRH), reinforces HAL’s long-term growth trajectory.

Financial Performance and Growth Outlook

HAL’s recent financial performance has been impressive, with Q1FY27 PAT exceeding expectations by 12%, driven by steady execution and improved margins. Analysts project revenue growth of 14% year-on-year for Q2FY27, with an estimated EBITDA margin of 26.1%, reflecting a 265 basis points increase year-on-year. Over the next five years, HAL is expected to achieve a revenue CAGR of 16%, supported by its strong order book and increasing indigenisation efforts.

Honasa Consumer: Transforming into a Profitable FMCG Player

Honasa Consumer, the parent company of brands like Mamaearth and The Derma Co., has successfully transitioned from a high-burn direct-to-consumer (D2C) entity to a profitable multi-brand FMCG platform. The company has seen rapid growth in its non-Mamaearth brands, which now contribute significantly to its overall revenue.

The Derma Co. has achieved an Annual Run Rate (ARR) of over ₹750 crore, becoming a leading active-ingredient sunscreen brand in India. With secondary offline sales growing at over 35% year-on-year, Honasa is expanding its market share in core categories like face cleansers and shampoos. The recent acquisition of a 58% stake in Fluence Pharma to launch ‘Honasa Health’ further positions the company in the lucrative nutraceuticals market.

Strong Financials and Future Growth Potential

In Q1FY27, Honasa reported a 26% year-on-year organic revenue growth, with EBITDA margins expanding by 485 basis points to 13.1%. The company has demonstrated its ability to identify emerging trends, scale both in-house and acquired brands, and maintain financial discipline. Analysts have raised FY26-29E EPS estimates by 12-18%, increasing the fair value of the stock to ₹580 based on a 50 times PE ratio for September 2028 estimates.

Key Highlights

• HAL’s order book has expanded to ₹2.55 lakh crore, providing strong revenue visibility.
• Q1FY27 PAT for HAL was 12% above expectations, driven by better margins.
• Honasa Consumer has transitioned to a profitable multi-brand FMCG platform.
• The Derma Co. achieved an ARR of over ₹750 crore, leading in active-ingredient sunscreens.
• Honasa’s Q1FY27 organic revenue growth was 26%, with EBITDA margins at 13.1%.
• Analysts have upgraded Honasa’s stock rating to ‘Buy’ with a new fair value of ₹580.

Investor Note: Investors should consider HAL and Honasa Consumer as strong long-term picks, given their robust order books and growth strategies in the aerospace and FMCG sectors, respectively.