India’s aerospace flagship, Hindustan Aeronautics Ltd (HAL), has once again captured market attention as Choice Equity Broking reaffirms its ‘BUY’ call, pegging a 12-month target price of Rs 5,000, up from the current levels of Rs 4,177. With the first delivery of GE’s F404-IN20 engine for the Tejas Mark-1A program and a sturdy order book of Rs 1.33 trillion, HAL stands poised to capitalize on its positioning as India’s backbone in indigenous military aviation. While engine delays for the Tejas Mark-2 and AMCA are concerns, its execution strength and strategic control in the defence ecosystem anchor its long-term investment appeal.

First GE Engine Delivery for Tejas Mark-1A Adds Tailwind

The recent handover of the first F404-IN20 engine by GE Aerospace to HAL signals the start of deliveries under a 99-engine contract signed in 2021.
With this milestone, HAL is gearing up to deliver 12 Tejas Mark-1A aircraft in 2025, eventually ramping up to 24 per year. This development not only enhances operational visibility but also improves investor confidence in the company’s production cadence.

Moreover, expectations of an additional order for 97 Tejas Mark-1A jets could boost the company’s near-term order inflow by Rs 1.13–1.23 trillion.

F414 Engine Talks Delay Tejas Mark-2 and AMCA Programs

While the Tejas Mark-1A moves forward, production and testing delays in the F414 engine program, critical to the Tejas Mark-2 and AMCA fighter jets, pose a medium-term risk.
These delays are tied to ongoing discussions between India and the U.S. over technology transfer terms, including advanced coatings, single-crystal blades, and laser drilling capabilities. As HAL awaits clarity under ITAR (International Traffic in Arms Regulations), these delays defer potential orders worth Rs 2.7–4.6 trillion.

Despite the temporary cloud, the finalization of these contracts would represent a substantial leap toward India’s aerospace self-reliance and would be a long-term sentiment driver.

Order Book Expected to Nearly Double by FY26

As of Dec 2024, HAL’s confirmed order book stands at Rs 1.33 trillion—equivalent to 4.15x its trailing 12-month revenue.
Choice Broking expects the total order pipeline to reach Rs 2.5 trillion by FY26, driven by active participation in marquee defense platforms including Tejas Mark-2, AMCA, TEDBF, LUH, LCH Prachand, and IMRH.

This robust order visibility provides sustainable revenue certainty over the next 4–5 years, insulating HAL from short-term demand shocks.

Private Sector Cannot Replicate HAL’s Strategic Moat

Despite rising investor concerns over private sector encroachment, HAL maintains an unassailable position due to its role as final integrator in India's flagship defense programs.
While private firms contribute to sub-systems and components, HAL’s access to government funding, proven execution, and control over classified IP ensure its strategic indispensability. Indigenous manufacturing capabilities and legacy infrastructure further limit the scalability of potential competitors.

Helicopter Platforms and Multi-Engine Orders Fuel Long-Term Growth

The company is executing and/or bidding for major helicopter programs, including:

LUH (110 units) – Expected order value: Rs 130–150 billion

LCH Prachand (156 units) – Rs 670 billion; orders received as of Feb 2025

IMRH (550 units) – Order pipeline: Rs 1.65–2.5 trillion; induction from 2030

These, alongside fighter jet platforms, collectively represent a long-term pipeline valued at Rs 6.3–9.1 trillion.

Topline Growth Driven by Steady Execution and Ramp-Ups

HAL’s revenue is projected to grow at a CAGR of 13% between FY24 and FY27, rising from Rs 3.03 trillion in FY24 to Rs 4.39 trillion in FY27.
This growth is supported by consistent execution across platforms and new deliveries. HAL’s EBITDA is forecast to climb from Rs 97.4 billion in FY24 to Rs 141.7 billion by FY27, with margins staying robust at ~32%.

The company is also expected to generate free cash flow of Rs 102.3 billion by FY27, supported by moderate capex and zero debt.

Profitability to Strengthen Further Despite Near-Term Margin Headwinds

PAT is estimated to rise from Rs 76.2 billion in FY24 to Rs 105.2 billion in FY27, reflecting an 11.4% CAGR.
While FY25 margins may trail initial guidance due to rising employee costs and elevated raw material inflation, the structural growth story remains intact.

HAL’s EPS is projected at Rs 157.4 by FY27, up from Rs 114 in FY24, with return on equity (RoE) stabilizing at 23.3%.

Valuation Attractive Amid Long-Term Visibility

Current Market Price: Rs 4,177

Target Price: Rs 5,000

Upside Potential: ~20%

FY27 P/E: 26.5x

EV/EBITDA (FY27): 17x

Price to Book (FY27): 6.2x

Free Cash Flow Yield (FY27): 3.6%

Compared to its historical average P/E of ~35x, HAL’s current valuation offers a compelling entry point backed by long-term execution strength and national strategic relevance.

Technical Levels to Watch for Traders and Investors

Support Zones: Rs 4,050 / Rs 3,800

Immediate Resistance: Rs 4,380

Breakout Confirmation: Rs 4,540 (High-volume close above this may signal strong bullish continuation)

Target Zone for 2025: Rs 5,000–5,150

The stock remains in a strong uptrend on weekly charts with rising volumes and robust institutional interest.

Conclusion: Strong Structural Story with Embedded Sovereign Backing

Hindustan Aeronautics Ltd. remains one of the few Indian defense companies with direct alignment to national security objectives, sovereign capex outlays, and high-value intellectual capital.
Despite short-term delays in engine procurement and margin headwinds, HAL’s long-term narrative remains anchored in order stability, execution resilience, and strategic indispensability. Choice Broking’s ‘BUY’ recommendation is underpinned by both valuation comfort and visibility into multi-trillion-rupee order inflows over the next decade.