LCA Tejas Mk-1A: Can Indigenous drive lift HAL shares to new territory? Here's price target

Multibagger Hindustan Aeronautics Ltd (HAL) hit a record high of Rs 3,700 earlier today and if one goes by Elara Securities the defence stock has potential to breach the Rs 4,000-mark going ahead. The ministry of defence (MoD) has  issued tender worth Rs 65,000 crore to HAL to secure 97 more LCA Tejas Mk-1A aircraft, making it the largest order for homegrown military hardware in India.

Elara said HAL's order backlog has reached 186 (83+97+6 trainers) LCA Tejas Mk-1A aircrafts and that LCA Tejas is set to become the second-largest fighter aircraft fleet at 225 in the Air Force after the Su-30.

On Monday, the HAL stock hit a record high of Rs 3,700  on BSE. It later traded at Rs 3,682, up 1.2 per cent in an otherwise weak day for the stock market.

"The additional LCA Tejas Mk1A aircraft would see a rise in  indigenization levels at 65 per cent-plus from 50-55 per cent. Thus, it is likely to drive huge opportunity for domestic companies (PSU as well as private). Key beneficiaries in the value chain are electronics manufacturers (radar,  avionics, electronic warfare, and related components), such as Bharat  Electronics, Astra Microwave, Data Patterns; fuselage makers, such as Dynamatic Technologies

& Vem Technologies, wings by L&T, and  other component makers, such as Mishra Dhatu Nigam (MIDHANI IN) and Lakshmi Machine Works," Elara said.

For HAL, Elara has kept its FY25 earnings estimates unchanged but has raised its EPS estimate by 6.5 per cent for FY26 on  higher other income due to likely inflow of large Tejas order in FY25.

It reiterate ‘accumulate’ on HAL with a higher target price of Rs 4,100 from Rs 2,975 based on 35 times March 2026 EPS against 28 times, as it rolled forward its estimates.

"Our revised target price is  driven by expectations from a new stream of the exports business, surge  in inflows, stable margin, and sustained double-digit earnings growth. We  believe rising share of indigenisation along with unexplored exports opportunity in the aircraft & helicopter industry warrant a rerating. We expect an earnings CAGR of 17 per cent during FY23-26E with a ROE of 24 per cent during FY24-26E," Elara said.

HAL shares are up 160 per cent in the last one year and 984 per cent in the last five years.

Elara said key risks to its call include lower spend in the defence  capital budget, less domestic procurement allocation, increased  competition from the private sector, and a significant increase in commodity prices.