HAL Share Price Expected to Surge; ICICI Securities Sets ₹5000 Target. Engine Delivery Alleviates Project Concerns, Strong Order Book.
Good news for HAL investors! GE Aerospace has delivered the first F404-IN20 engine to HAL for the Tejas Mk 1A fighter jet. This delivery is part of a 99-engine order, sparking expectations of a rise in the company's share price. ICICI Securities has raised HAL's target price to ₹5000, up from ₹4065, representing a potential upside of 21%. The brokerage has upgraded HAL's rating from 'Add' to 'BUY', highlighting it as a top pick in the defense sector.
Engine Delivery Boosts HAL's Prospects
The receipt of the first engine from GE Aerospace has eased concerns surrounding HAL's projects. This marks a significant step for the Tejas Mk 1A program, with the company expecting to receive 12 engines this year. The company aims to produce 10 Tejas Mk 1A aircraft by FY26, increasing this number to 24 by FY30. According to ICICI Securities, HAL's revenue could grow by 25% in FY26 and 28% in FY27, leading to a 39% increase in earnings per share (EPS) over the next two years.
HAL's Robust Order Book
HAL boasts an order book exceeding ₹1.3 lakh crore. This includes orders for 97 Tejas Mk 1A and 156 LCH Prachand helicopters. According to Air Chief Marshal V.R. Chaudhari, the Indian Air Force requires 35-40 new fighter jets annually. HAL aims to complete the first Tejas Mk-II aircraft by October 2025, with the first flight expected by March 2026. Negotiations with GE are also underway for technology transfer of the F-414 engine.
Benefits Extending Beyond HAL
The Tejas Mk 1A project benefits not only HAL but also other companies. Companies like BEL, Astra Microwave, and Dynamatic Technologies, which supply radar systems, electronic systems, and fuselage components, are expected to receive increased orders in the future.
ICICI Securities' Outlook
ICICI Securities believes that the engine delivery from GE has cleared the path for HAL's success, placing the company in a b long-term position. The company's Tejas Mk-II and AMCA projects are also gaining momentum. The brokerage has reduced its weighted average cost of capital (WACC) from 12% to 11% due to reduced risk, leading to the ₹5000 target price. HAL now presents a compelling investment opportunity.
