Why Does MOSL Stay Bullish on HAL After the Fresh Tejas Order?
Hindustan Aeronautics Limited (HAL), India’s premier aerospace and defense manufacturer, has once again taken center stage in the defense sector with the Ministry of Defence awarding it a follow-on order worth ₹62,400 crore for 97 Tejas LCA Mk1A fighter jets. This comes on top of the earlier order of 83 jets placed in January 2021, significantly expanding HAL’s execution pipeline. Motilal Oswal (MOSL) has maintained its Buy rating on HAL with a revised target price of ₹5,800, citing the strong order book, resolution of engine supply issues, and sustained execution momentum.
Massive Scale-Up in Tejas Program
• New order: 97 LCA Mk1A aircraft worth ₹62,400 crore
• Earlier order: 83 jets in Jan 2021
• Total Tejas orders: 180+ aircraft
• Execution start: From 3QFY25 onward
This large order not only boosts HAL’s backlog but also signals long-term revenue visibility. With the government pushing for indigenous defense production, the Tejas program remains at the heart of India’s self-reliance efforts.
Engine Supply Bottlenecks Resolved
• GE has resumed normal deliveries of F404 engines
• Prior supply chain issues resolved
• Supports acceleration of aircraft handovers
• Related USD 1b order for 113 engines expected soon
The supply of F404 engines was a key bottleneck in scaling deliveries. With GE resuming normal shipments, HAL is better positioned to ramp up output and adhere to its delivery schedules.
Execution Outlook and Financial Implications
• HAL to begin Tejas deliveries from 3QFY25
• Large-scale execution to kick in FY26 onward
• Order provides multi-year revenue visibility
• Potential for operating leverage and margin support
MOSL’s estimates now build in a faster scale-up in deliveries, supporting stronger revenue recognition in the coming years. The increased order book improves the visibility of growth through FY30 and beyond.
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Sectoral Tailwinds
• Rising government allocation to defense capital expenditure
• Push for “Make in India” in defense procurement
• Export opportunities for indigenous aircraft and helicopters
• Strategic partnerships with global OEMs adding strength
With India’s defense modernization gaining momentum, HAL stands as a direct beneficiary. Apart from Tejas, the company is expanding its portfolio with helicopters, trainers, and UAVs, further diversifying revenue streams.
Valuation and MOSL’s Call
• MOSL maintains Buy rating
• Target Price: ₹5,800
• Execution scale-up supports earnings growth
• Positive stance on defense sector continues
HAL’s valuation premium is justified by its order book strength, execution capability, and strategic importance. MOSL believes the stock offers long-term compounding potential as India’s defense sector matures.
Investor Takeaway
MOSL’s reaffirmation of a Buy on HAL highlights the company’s strong fundamentals and growth prospects. The large Tejas order, resolution of engine supply issues, and sectoral tailwinds create a favorable setup for long-term investors. HAL remains a core play on India’s defense indigenization journey.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
Written by Indian-Share-Tips.com, which is a SEBI Registered Advisory Services
