HAL shares: Will GE engine delivery give thrust to defence PSU stock?

Shares of Hindustan Aeronautics Ltd (HAL) climbed 2 per cent in Thursday's trade as GE Aerospace delivered the first of 99 F404-IN20 engines to the defence PSU for the light combat aircraft Tejas Mk 1A. 
To be sure, the Tejas Mk-1A is Rs 48,000-crore order and accounts for nearly 37 per cent of HAL's calculated order book of Rs 1.3 lakh crore.

Shares of HAL rose 2 per cent to Rs 4209.20. The defence stock has climbed 28.29 per cent in the past one month and is flat for 2025. 

This development allays concerns on the execution front, said ICICI Securities. The consistent supply of F-404 engines for Tejas Mk-1A could lead to an upside earnings risk to FY26 and 27 EPS estimates, said Antique Stock Broking as it factored in delivery of 8 and 10 Tejas Mk-1A aircrafts
in FY26 and FY27, respectively.

"We like HAL given its monopolistic position in the fighter aircraft and helicopter business and given its multi-year double-digit earnings growth potential and robust return ratio profile of 20 per cent. We believe that the stock is attractively valued and thus retain BUY rating with a target of Rs 4,887, valuing it on a PE multiple of 40x FY27E earnings," Antique said.

ICICI Securities expects HAL to report revenue growth of 25–28 per cent through to FY27E. 

"There are further orders of 97 Tejas Mk 1A and 156 (nos.) LCH Prachand in the pipeline. As a result of reduced execution concerns and lower risk on our earnings estimates, we roll back our WACC to 11 per cent (earlier 12 per cent), resulting in a revised target of Rs 5,000 (earlier Rs 4,065)," it said.

This brokerage upgraded HAL to 'Buy' from 'Add' and recommended it as its top pick among defence PSUs. 

Antique said the supply normalisation from GE could help scale up HAL's
manufacturing revenue which is currently muted. Further, HAL's strong order pipeline from a medium to long term perspective provides comfort to the company of long term business potential, it said.