Global brokerage Jefferies has maintained a Buy rating on Hindustan Aeronautics Ltd (HAL), setting a price target of Rs 6,800. This target implies a 43% upside from the stock's September 29 closing price of Rs 4,739. The brokerage identifies the successful delivery of the Tejas Mk1A fighter aircraft as a critical catalyst for re-rating the stock, which has faced investor skepticism due to execution delays since 2024.
According to Aerospace Global News, delays in the supply of GE Aerospace F404-IN20 turbofan engines represented the single largest constraint on HAL's assembly line, leading HAL to invoke contractual liquidated damages clauses.
According to the brokerage, acceptance of even a single aircraft by the Indian Air Force would serve as a crucial catalyst to demonstrate manufacturing capabilities. Furthermore, the valuation trades at a 13% discount compared to the target multiple for Bharat Electronics, alongside a debt-free balance sheet.
HAL Chairman and Managing Director Ravi Kota has expressed confidence in delivering Tejas Mk1A aircraft within the current calendar year. This outlook follows the successful completion of the Tejas Mk1 trainer aircraft contract, which saw 18 units delivered to the Indian Air Force on September 18. According to Jefferies, testing for the Mk1A variant is well advanced, with 24 airframes already prepared and GE engines installed. The brokerage notes that 90 to 95% of radar and missile integration and certification processes are complete, and HAL has already received 10 engines from GE.
Jefferies highlighted that the company's internal target of delivering 10 aircraft this year exceeds the brokerage's own earlier estimate of five. The firm emphasized that the Indian Air Force accepting even a single aircraft would serve as a significant upside driver, effectively validating HAL's execution capabilities and easing investor concerns.
Beyond the Tejas programme, which accounts for 43% of the company's order book, HAL maintains a robust financial foundation. The company holds an order book of Rs 2.55 lakh crore, representing 7.7 times its FY26 revenue, alongside a pipeline of Rs 1.8 lakh crore extending through FY30. Jefferies projects a 15% compound annual growth rate (CAGR) for revenue and a 17% CAGR for EBITDA between FY26 and FY30, driven by operational efficiencies and increased in-house manufacturing.
According to NDTV Profit, jefferies estimates HAL's EBITDA margins will expand from 29.6% to 32.7% across the FY26 to FY30 forecast period as indigenous manufacturing scales. According to NDTV Profit, hAL's prospective ordering pipeline beyond current firm orders totals Rs 1.8 trillion through FY30, driven by Su-30 MKI modernization programs and military helicopter procurements.
The Rs 6,800 target values HAL at 35 times its estimated September 2028 earnings. This valuation represents a 33% discount to the stock's peak multiple and a 13% discount to the target multiple assigned to Bharat Electronics Ltd (BEL). HAL continues to maintain a debt-free balance sheet with a return on equity (ROE) consistently above 22%.
