Re-rating on cards for HAL shares as Tejas Mk1A aircraft deliveries near: Jefferies

Tejas Mk1A, which accounts for 43% of Hindustan Aeronautics Ltd’s (HAL) order book, could be a key re-rating trigger for the stock as visibility on fighter aircraft deliveries improves, according to Jefferies. HAL CMD Ravi Kota is confident of delivering Tejas Mk1A aircraft this year, with testing underway and 24 airframes ready.

Jefferies has retained its Buy rating on HAL with a price target of Rs 6,800, implying 43% upside from the September 29 closing price of Rs 4,739. The brokerage said successful execution of the Tejas programme could help address investor concerns that have weighed on the stock since 2024.

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HAL confident of delivering 10 Tejas jets

After completing deliveries of 18 Tejas Mk1 trainer aircraft to the Indian Air Force on September 18, Kota said he was confident of delivering Tejas Mk1A aircraft this year.

Testing is currently underway, with 24 airframes ready and GE engines installed and tested on the aircraft. HAL has received 10 engines from GE, while 90-95% of radar and missile integration and certification has been completed, according to Jefferies.

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That puts the company’s own target ahead of the brokerage’s earlier expectations.

Jefferies is now comparing Kota’s confidence of delivering 10 aircraft this year with its own earlier estimate of five.

The brokerage said the first delivery could matter disproportionately for investor sentiment. “We believe that Indian Air Force accepting delivery of even one aircraft will give confidence on the company’s abilities and be a key upside driver,” it said.

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Order book offers cushion beyond Tejas

The Tejas programme is important, but it is not the only thing supporting HAL’s longer-term growth story. The company has a Rs 2.55 lakh crore order book, equivalent to 7.7 times FY26 revenue, along with a Rs 1.8 lakh crore pipeline extending into FY30 and beyond.

Jefferies expects HAL’s revenue to grow at a 15% CAGR between FY26 and FY30, while EBITDA is expected to rise at 17% CAGR as margins improve with optimisation and higher in-house manufacturing.

The brokerage’s Rs 6,800 target values HAL at 35 times September 2028 earnings. It also expects absolute profits to rise 1.8 times over four years, with ROE remaining above 22% and the company maintaining a debt-free balance sheet.

HAL shares were trading at Rs 4,665, up 2.54% on Wednesday at around 12:30 pm. The stock has declined 3.56% over the past week and 1.74% over the past year.

Disclaimer: This article has been written by Sakshi Kumari, who is not a SEBI-registered Research Analyst or an Investment Adviser. Sakshi Kumari and her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here