Shares of Hindustan Aeronautics Limited (HAL) rose by 4% following the company’s announcement of a 22% year-on-year increase in net profit for the quarter ending September 30, 2024.

The state-run defense company reported a net profit of Rs 1,510 crore for Q2FY25, compared to Rs 1,237 crore in the same quarter of the previous year. Revenue from operations also showed a positive growth of 6%, reaching Rs 5,976 crore, up from Rs 5,640 crore in the corresponding period last year.

On a sequential basis, HAL’s profit after tax (PAT) increased by 5% from Rs 1,437 crore in Q1FY25, signaling consistent performance. Additionally, the company's revenue surged by 37% on a quarter-on-quarter (QoQ) basis, compared to Rs 4,34,750 crore in the April-June quarter of the same financial year.

This positive performance has attracted favorable attention from analysts, with domestic brokerage firm ICICI Securities giving the stock a target price of Rs 5,170, while maintaining an 'add' rating.

However, ICICI Securities has also adjusted its earnings estimates, lowering the FY25/26 EBITDA forecast by 16% and 4%, respectively. The brokerage cited delays in engine deliveries for the Tejas Mk-1A fighter jet program as a key factor affecting revenue growth.

Additionally, the uncertainty surrounding future orders and the impact of rising raw material costs have been flagged as risks to the company’s earnings. The report also mentions an increase in the discount rate by 100 basis points to 11% in its discounted cash flow (DCF) model, reflecting these concerns.

Despite the strong financial performance, HAL's stock has been facing technical challenges. After reaching an all-time high of Rs 5,674.75 in July 2024, shares of HAL have corrected by nearly 30% and have dropped by 8.55% in the past month.

The stock has been showing a pattern of lower tops and lower bottoms on its daily chart. Recently, it encountered resistance near the Ichimoku cloud, leading to a 6-7% decline in a single week.

The stock is currently trading below its key short, medium, and long-term exponential moving averages (EMAs). Market analysts suggest that if HAL’s stock closes decisively below Rs 4,100, it could experience further downside pressure, potentially pushing it toward the Rs 3,700-3,850 range.

On the other hand, any potential rebound may face significant resistance in the Rs 4,400-4,650 range, making the near-term outlook for the stock somewhat uncertain.