Tejas Mk-1A: HAL shares a Buy as GE-404 engine supplies resume, says Antique

Antique Stock Broking has reaffirmed its Buy rating on Hindustan Aeronautics Ltd (HAL), citing the company's strong multi-year double-digit earnings growth potential and a robust return ratio profile exceeding 20 per cent. The brokerage maintained a target price of Rs 6,360, valuing HAL at a PE of 40 times H1FY28E earnings.

Recent supply chain issues delayed the Tejas Mk-1A fighter aircraft order, but Antique Stock Broking remains positive. General Electric (GE) has supplied its third GE-404 engine for the Tejas Mk-1A, with a fourth expected by September 2025. Deliveries have lagged due to engine shortages, but GE is contractually required to supply two engines per month, and improvements in supply are being closely monitored. The timely supply of engines is critical for maintaining the production schedule, and the recent uptick in deliveries suggests bottlenecks are gradually easing, paving the way for improved execution in the coming quarters.

If GE maintains this pace, HAL could finalise an additional order for 97 Tejas Mk-1A aircraft, raising the backlog to 180 units and further improving revenue visibility. This would strengthen HAL's position as a leading supplier to the IAF and reinforce confidence in its order pipeline, Antique said.

HAL is supporting the Indian Air Force's (IAF) efforts to increase its fighter squadrons from 31 to 42, underscoring HAL's pivotal role in modernising India's air combat capabilities.

Looking forward, Antique Stock Broking expects HAL to deliver 8 and 14 Tejas Mk-1A aircraft in FY26 and FY27, respectively, with a gradual ramp-up in GE's engine supply. Consistent engine deliveries could provide upside to manufacturing revenue estimates for these years.

HAL's order book remains robust. At the end of FY25, it stood at Rs 1.8 lakh crore—6.2 times its trailing twelve-month revenue. Additional Tejas Mk-1A orders could boost this to Rs 2.5 lakh crore. The pipeline is healthy, with advanced helicopter and aircraft upgrade projects, and long-term opportunities estimated at Rs 4.5 lakh crore over the next decade.

To execute its large backlog, HAL is investing in new capacities and technology. It has signed an MoU with GE to manufacture GE-F414 fighter jet engines in India and is working with Safran on turboshaft engines. HAL has planned Rs 15,000 crore in capex over the next five years, focusing on repair, overhaul, and manufacturing infrastructure for future platforms.