Midhani surges 7%; hits new high on pact with Boeing for aerospace parts

Boeing India on Tuesday reportedly announced it would assess and collaborate with Midhani to develop raw materials for standard aerospace parts and components in India.

Shares of Mishra Dhatu Nigam (Midhani) rallied 7 per cent to hit a new high of Rs 258.65 on the BSE in Wednesday’s intra-day trade after reports said that the company will work with Boeing India to develop raw materials for aerospace parts.

The stock of the state-run aerospace & defence company surpassed its previous high of Rs 251.50, which it had touched on October 10, 2022. In the past three months, it has zoomed 55 per cent as compared to a 8 per cent rise in the S&P BSE Sensex.

Boeing India on Tuesday announced it would assess and collaborate with Midhani to develop raw materials for standard aerospace parts and components in India, reported news agency PTI. 

Boeing said indigenous availability of special aerospace materials and alloys has been identified as crucial for creating a self-reliant aerospace and defence industry in India. The availability of essential aerospace materials is the first step in securing the supply chain, and aligning with the NDA government's vision of Aatmanirbhar Bharat, the report said quoting a press release by Boeing.

Midhani is engaged in the business of manufacturing of superalloys, titanium, special purpose steel and other special metals.

The government is expected to invest close to Rs 10 trillion ($130 billion) on military modernisation in the next 5-6 years. The Defence Acquisition Policy (DAP) 2020 emphasises on >50 per cent indigenous content for a majority of the procurement categories, Midhani said in its FY22 annual report.

The requirement of indigenous content in platforms and systems is likely to translate into demand for indigenous raw material providing thrust to the Indian metals & alloys manufacturers. The demand in associated sectors including aerospace manufacturing, space, electric vehicles, railways will be tapped to obtain economies of scale, the company said.

Midhani has been consistent in getting orders with defence, space, aeronautics, power and thermal power, electronics, telecommunications, engineering and other sectors. Its order inflow was at around Rs 160 crore in Q1FY23 and the order booking position for FY23 (as on date) is around Rs 470 crore.

The open order position of Midhani as on date is around Rs 1,535 crore. Besides, the company is also in a pact with the Indian Airforce for developing and indigenising various metal powders such as titanium alloys, aluminium alloys and special steel for additive manufacturing process for the production of aviation items.

The company could shortly receive an order of bulletproof jackets. Its order book stands at around Rs 1,360 crore as of June 31, 2022, of which defence (including sale to PSUs) is 48 per cent, space is 37 per cent and rest is others, HDFC Securities said in a report.

Considering the company’s strong financial profile led by healthy profitability levels and return indicators and a comfortable capital structure, the brokerage has a positive view on the stock with a bull case fair value of Rs 260.50.

Technical View

Bias: Positive

Support: Rs 245

Targets: Rs 266, Rs 277

The stock is trading with an upward bias since mid-August, and has rallied as much as 52 per cent in the last two months. During the course of the run, the stock corrected twice after testing the higher-end of the Bollinger Band on the daily chart.

Once again, the stock is seen testing the higher-end of the Bollinger Band on the daily chart. Hence, in case the stock is unable to sustain above Rs 253, an interim corrective move towards Rs 225 - Rs 230 seems possible.

On the weekly chart, the trend is extremely bullish with near-term support seen at Rs 245. As per the yearly Fibonacci chart, the next significant resistances for the stock are placed at Rs 266, and Rs 277 above Rs 258 levels.

(With inputs from Rex Cano)