Hindustan Aeronautics (HAL) is at a point where the next few aircraft deliveries could matter as much as the company’s large order book. The key question is no longer only about how many orders the defence PSU has secured but how quickly it can turn those orders into actual deliveries and revenue.
Global investment bank Jefferies has a ‘Buy’ rating on HAL and a target price of Rs 6,800. Against the stock’s recent market price, this implies an upside potential of about 43%.
According to the Jefferies report, the biggest near-term trigger is the Tejas Mk1A programme. So, what should investors watch next about this defence sector stock?
HAL: Tejas Mk1A delivery becomes the key test
HAL’s execution on the Tejas Mk1A fighter aircraft has remained an important focus for the market. The programme has faced delays, raising questions about the company’s ability to deliver aircraft according to its planned schedule.
According to the Jefferies report, HAL Chairman and Managing Director Ravi Kota has indicated that the company remains confident about starting Tejas Mk1A deliveries this year.
Jefferies report added, “90-95% of radar and missile integration/certification completed for Tejas Mk1A,” the report said, citing the CMD’s media interviews.
The report added that 24 airframes are ready, with General Electric engines installed and aircraft testing underway. HAL has received 10 engines from General Electric for the programme.
Jefferies believes the delivery of even the first aircraft could be an important signal for the company’s execution. The global investment bank expects 10 aircraft to be delivered this year, compared with its earlier assumption of five.
HAL: Why is Tejas Mk1A so important?
The reason is its size within HAL’s order book. According to Jefferies, Tejas Mk1A accounts for around 43% of the company’s order book.
The brokerage therefore sees the programme as more than just another aircraft contract. A visible improvement in deliveries could help address concerns that have remained around execution since 2024.
The report said, “HAL’s stock has de-rated given delays on Tejas Mk1A since CY24 and raised investor concerns on the company’s execution ability.”
HAL’s large order book provides revenue visibility
HAL’s order book stood at around Rs 2.55 trillion, according to the Jefferies report. This is equivalent to around 7.7 times its FY26 revenue.
The company also has a pipeline of around Rs 1.8 trillion. According to Jefferies, this provides visibility for revenue growth from financial year 2027 to financial year 2030 and beyond.
The global investment bank said, “Rs 2.55 trillion order book (7.7x FY26 revenues) and Rs 1.8 trillion pipeline provides visibility for FY27E-30E and beyond.”
HAL: What could change the valuation?
Jefferies’ base case values HAL at 35 times estimated September 2028 earnings per share. The brokerage estimates earnings per share at Rs 194 and arrives at its Rs 6,800 target price.
It expects the company’s absolute profits to rise 1.8 times over four years, while return on equity could remain above 22%.
The report said, “1.8x rise in absolute profits over 4 years, 22%+ ROE and debt-free B/S with technology should drive upside.”
At the same time, there are risks. Execution delays remain one of them. The pace of defence ordering and changes in the focus on indigenisation could also influence the outlook.
Jefferies noted, “Downside risks: 1) execution delays in manufacturing, 2) defence indigenization focus reduces.”
For investors tracking HAL, therefore, the next few milestones could be important such as the Tejas Mk1A deliveries, engine availability, aircraft testing and the pace at which the large order book converts into revenue.
Disclaimer: This article is based on research reports from one or more brokerage firms and is for informational purposes only. The views, target prices, and recommendations expressed are those of the respective brokerage firms and do not reflect the official policy or position of Financial Express. This should not be construed as an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor before making any investment decisions.