Brokerages Bullish on HAL as Tejas MK 1A Engine Deliveries Kick Off

HAL Stock Soars 30% in One Month as Execution Concerns Ease

Shares of Hindustan Aeronautics Ltd. (HAL) have surged nearly 30% over the past month, driven by growing investor confidence following the delivery of the first batch of F404-IN20 engines for the Tejas Light Combat Aircraft (LCA) Mk 1A. Analysts believe this development marks a significant milestone for HAL, easing execution risks and boosting its long-term growth prospects in India’s defense sector.

Global and domestic brokerages, including JPMorgan and ICICI Securities, have reiterated their bullish stance on HAL, expecting the stock to climb another 20% from current levels.

GE Aerospace Delivers First F404-IN20 Engines for Tejas Mk 1A

GE Aerospace, the U.S.-based aviation giant, has confirmed the first delivery of the 99 F404-IN20 engines ordered by HAL in a Rs 5,375 crore deal signed in 2021.

Why This is a Game-Changer for HAL:

• Lifts execution concerns: Engine delays had been a major overhang on HAL’s stock, and the successful delivery removes uncertainty.

• Strengthens Tejas Mk 1A production pipeline: HAL is now on track to scale up production of the Tejas Mk 1A fighter jet, India’s indigenous light combat aircraft.

• Enhances long-term revenue visibility: With steady deliveries, HAL is poised to capitalize on India’s growing defense needs.

Brokerage Reactions:

• ICICI Securities: “This is a vital development that allays execution risk concerns.”

• JPMorgan: “With engine deliveries now in motion, the overhang on HAL’s stock has been lifted.”

At Aero India 2024, HAL announced that it expects to receive 12 F404-IN20 engines this year, with production capacity set to gradually increase from 10 aircraft per year in FY26 to 24 by FY30.

Brokerage Ratings: HAL Set for Further Upside

As a result of the engine deliveries and improved earnings visibility, leading brokerages have upgraded their price targets on HAL stock.

JPMorgan’s View:

• Maintains an ‘Overweight’ rating on HAL.

• Revised target price: Rs 4,958, implying a 20% upside from current levels.

• Cites HAL’s near-monopoly in India’s defense aviation sector as a key advantage.

ICICI Securities’ Upgrade:

• Upgrades HAL stock from ‘Add’ to ‘Buy’.

• Raises target price from Rs 4,065 to Rs 5,000 per share.

• Attributes the upgrade to reduced execution concerns and lower risk to earnings estimates.

At 12:50 PM, HAL shares were trading at Rs 4,175.1, up over 1% on the NSE.

HAL’s Dominance in India’s Defense Sector

HAL remains India’s premier state-run aerospace company, benefiting from strong government orders and an expanding defense manufacturing ecosystem.

Key Strengths Driving HAL’s Growth:

1. Tejas Mk 1A Orders: The Indian Air Force (IAF) has placed a Rs 48,000 crore order for 83 Tejas Mk 1A jets, ensuring steady revenue inflows.

2. Advanced Fighter Jet Programs: HAL is spearheading the AMCA (Advanced Medium Combat Aircraft) and TEDBF (Twin-Engine Deck-Based Fighter) programs.

3. Helicopter and Drone Expansion: The company is ramping up production of Light Combat Helicopters (LCH) and drones, diversifying its portfolio.

4. Global Partnerships: Collaborating with GE Aerospace for engine manufacturing and exporting aircraft components to international defense firms.

The Road Ahead: HAL Positioned for Long-Term Gains

With execution risks now significantly reduced, HAL is well-positioned to capture growth opportunities in both domestic and export markets. The stock’s 30% rally in one month underscores the market’s confidence in its long-term prospects.

What to Watch For Next:

• Further engine deliveries from GE Aerospace.

• Tejas Mk 1A production ramp-up in the coming years.

• Potential export deals for Tejas and Light Combat Helicopters.

• Government defense budget allocations benefiting HAL’s order pipeline.

Brokerages remain optimistic on HAL’s future, with price targets suggesting more upside ahead as the company cements its leadership in India’s defense aviation sector.