Investment firm Motilal Oswal predicts a 32% rise in Tejas, alongside two other 'Make-In-India' initiatives. Now the question is, what does this mean for investors moving forward?
Hindustan Aeronautics Limited (HAL) is experiencing a surge in its share price, as the company gears up for a period of significant growth. Motilal Oswal, a leading financial services company, has expressed optimism towards HAL, citing several strategic reasons for their bullish outlook.
Tejas Aircraft Deliveries
One of the key drivers for HAL's growth is the substantial order for 97 additional Tejas Mk1A fighter jets. This brings the total order to 180 aircraft, providing a strong revenue visibility for HAL over the coming years. The company aims to deliver 12 Tejas Mk1As this fiscal year and plans to increase its annual target to 24 jets going forward [1][3][4]. Despite initial challenges in engine supply, the production line is now stabilized, supported by both HAL and GE engines [1].
Make-in-India Initiatives
The Tejas Mk1A boasts more than 65% indigenous content, aligning with India's "Make-in-India" initiative. This percentage is expected to increase further, contributing to HAL's growth and self-sufficiency in aircraft manufacturing [3]. The increasing indigenous content not only supports HAL's production efficiency but also enhances India's defense capabilities by reducing reliance on foreign components.
SSLV Project Diversification
HAL has recently diversified into space technology by signing a contract to manufacture parts for the Indian Space Research Organisation's (ISRO) Small Satellite Launch Vehicle (SSLV). This expansion into the space sector offers additional revenue streams and growth opportunities beyond its traditional aerospace business [4][5]. The diversification into space technology enhances HAL's strategic value and potential for future growth.
Strong Manufacturing Order Book
A strong manufacturing order book is anticipated to support HAL's execution growth. The company expects a smooth ramp-up in production and deliveries in the years ahead due to resolved supply chain challenges and validated testing [6].
Private-Sector Collaboration
The first batch of wing assemblies for the Tejas aircraft has been provided by L&T, highlighting increasing private-sector collaboration under the Make-in-India initiative [7].
Future Prospects
Motilal Oswal has reiterated a Buy recommendation for HAL with a target price of 5,800 per share. The firm expects eight aircraft deliveries for FY26 and 16 aircraft from FY27 onwards [8].
Moreover, HAL has issued a Letter of Intent to Israel's ELTA Systems for supplying radar and electronic warfare systems [9]. Additionally, two GE F-404-IN20 engines have already been delivered for the Tejas aircraft, with one more expected this month [10].
The growth catalysts for HAL are emerging from the Tejas aircraft deliveries and the finalization of orders for 97 Tejas-Mk1A. Furthermore, HAL is strengthening the space sector with the Transfer of Technology (ToT) for SSLV, as per Motilal Oswal [5]. This move aligns with India's ambition to expand its space economy to $40 billion by 2040, potentially giving HAL leverage on upcoming satellite constellation and space station projects [6].
In conclusion, these factors create a strong foundation for Motilal Oswal's bullish outlook on HAL, driven by solid order books, strategic diversification, and alignment with national initiatives like "Make-in-India."
[1] India Today [2] The Economic Times [3] The Hindu [4] The Financial Express [5] The Hindu BusinessLine [6] The Economic Times [7] The Economic Times [8] The Financial Express [9] The Economic Times [10] The Economic Times
- The surge in Hindustan Aeronautics Limited (HAL)'s share price is attributed to the company's strategic growth plans, especially in relation to the Tejas Mk1A fighter jet deliveries.
- Motilal Oswal expects HAL to deliver 8 aircraft in FY26 and 16 aircraft from FY27 onwards, indicating a positive outlook for trading investments in the company.
- The diversification of HAL into space technology through the Small Satellite Launch Vehicle (SSLV) project expands its portfolio beyond traditional aerospace and offers potential growth opportunities in the rapidly developing space-and-astronomy sector.
- In conjunction with Motilal Oswal's bullish outlook, India's ambition for a $40 billion space economy by 2040 presents further investment prospects for technology companies in the Defi and finance sectors.
- The successful collaboration between HAL and the private sector, as seen in the L&T wing assemblies for Tejas aircraft, demonstrates the fusion of finance, science, and technology, further boosting the economy.
