Stock of this PSU defence company has zoomed 113% thus far in 2022

Shares of Hindustan Aeronautics (HAL) continued at their northward journey, hitting a new high of Rs 2,578 on the BSE, as they rallied 6 per cent in Monday's intra-day trade on strong outlook amid healthy order visibility. Thus far in the current calendar year 2022 (CY2022), the stock of the state-owned aerospace & defense company has zoomed 113 per cent as compared to 1.7 per cent rise in the S&P BSE Sensex.

HAL debuted on the bourses in March 2018. The company had raised Rs 4,113 crore through initial public offering (IPO) by issuing shares at Rs 1,215 per share. The stock has surged 475 per cent from its record low level of Rs 448 touched on March 24, 2020. In the past six months, HAL has outperformed the market by soaring 83 per cent, as compared to an 8 per cent rise in the S&P BSE Sensex.

HAL is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures. The company has been set up to meet the requirement of Indian Defence Forces (namely Indian Airforce, Indian Navy, Indian Army and Indian Coast Guard) in the area of Aerospace.

According to HAL, Indian Defence market will continue to be a prime revenue source for the company due to projects like LCA Mk1A, LCH, LUH and HTT-40. Further, HAL said the company is deeply dedicated towards manufacturing of indigenous aircraft and helicopter under Atmanirbhar Bharat and to achieve greater milestones in coming years.

The possible opportunities available for the Company in the future are, thrust of the government towards domestic products for developing a self-reliant industry will bring greater opportunities for new orders. The stability of military sector during the time of crisis will entice commercial players to diversify in to military sector as risk mitigation strategy. This will bring opportunities for HAL to diversify into commercial sector by forming strategic alliance with such companies.

Meanwhile, to boost the growth of the Company, HAL is focusing on the International Market, Civil Aviation, Civil MRO, UAVs and other diversified business opportunities through indigenous efforts and business collaborations with Indian Private Industry/global OEMs, the company said in its FY22 annual report.

HAL highlighted visibility on orders worth around Rs 1.5 trillion over next three years, with Rs 45,000 crore of manufacturing orders expected in FY23- H1FY24. Management is confident of maintaining 24-25 per cent EBITDA margins. Supply chain of Russian spares has been managed effectively and the company is looking at around Rs 13,000 crore of Repair and overhaul (ROH) revenues in FY23.

"The Management highlighted its internal target of Rs 2,500 crore in export revenues by FY25. Current orderbook stands at around Rs 85,000 crore including a fresh order of around Rs 6,000 crore in Q1FY23," analysts at ICICI Securities said. The brokerage firm maintains a 'buy' rating on HAL with a target price of Rs 2,655 per share.