Hindustan Aeronautics soars 10% on solid Q4 results; m-cap crosses Rs 3 trn

HAL stock price: HAL surpassed Avenue Supermarts (D-Mart), Power Grid Corporation, Adani Green Energy, Titan Company, Adani Ports, Coal India and M&M in overall market cap ranking

Shares of Hindustan Aeronautics (HAL) hit a new high of Rs 4,654.5 as they surged 11.2 per cent on the BSE in Thursday's intraday trade after the company posted a solid 52 per cent year-on-year (Y-o-Y) jump in its consolidated net profit at Rs 4,308.68 crore for the March quarter (Q4FY24).

The state-owned defence company had a net profit of Rs 2,831.19 crore in Q4FY23. On a sequential basis, net profit more-than-doubled from Rs 1,261.51 crore in the December 2023 quarter (Q3FY24). Total income from operations grew 18.2 per cent Y-o-Y to Rs 14,768.75 crore from Rs 12,494.67 crore.

In the past one week, the stock price of HAL has appreciated by 20 per cent, as compared to 1 per cent rise in the S&P BSE Sensex.

A sharp rally in HAL stock price has pushed the company's market capitalisation (market cap) above Rs 3 trillion for the first time ever. At market close, with an m-cap of Rs 3.078 trillion, HAL stood at 21st position in the overall market cap ranking, BSE data shows. HAL stock price ended 10 per cent higher at rs 4,603 per share as against a 0.9-er cent rise in the Sensex index.

With today's surge. HAL surpassed Avenue Supermarts (D-Mart), Power Grid Corporation, Adani Green Energy, Titan Company, Adani Ports and Special Economic Zone, Coal India, and Mahindra & Mahindra (M&M) in the overall market cap ranking.

Since November, the market price of HAL has more-than-doubled, zooming 152 per cent. Since September 28, 2023, it has rallied 143 per cent after the company's share split in 1:1 ratio. The stock crossed its pre-split high of Rs 4,180 touched on September 11, 2023.

On September 28, 2023, HAL sub-divided the face value of equity shares from Rs 10 into Rs 5, to enhance the liquidity of company's equity shares at the stock market and to encourage participation of retail investors by making equity shares of the company more affordable.

Meanwhile, earlier this week, brokerage firm UBS raised its price target on the stock from Rs 3,600 to Rs 5,200 led by earnings upgrade. It increased target PE from 32x to 40x. Analysts believe this is justified by HAL's better order book scale up, lower competition, and greater optionality in exports.

HAL, one of the largest defence PSUs in India, is engaged in design, development, manufacture, repair, overhaul, upgrade, and servicing of a wide range of products including, aircraft, helicopters, aero engines, avionics, accessories and aerospace structures.

Analysts at UBS forecast a threefold increase in HAL's order book and 25 per cent revenue growth in the manufacturing topline (50 per cent of revenue) in FY23-27E. This would be led by a pick up in large military orders due to a depleting fleet, a robust supply chain, and ready capacity.

UBS expects order wins of Rs 5.3 trillion over FY24-28 (Rs 6.5 trillion and Rs 3.8 trillion in the brokerage firm’s upside and downside scenario, respectively), implying a quadrupling of the order book by FY28E, led by the government's faster decision-making and shorter turnaround.

"The government's push towards increasing domestic content in HAL's platform and a growing domestic supply chain should improve HAL's execution capability and profitability, supported by its timely capex. Hence we think the Street's concern about production ramp up looks misplaced," the brokerage firm said.

Last week, Nomura, too, initiated coverage on HAL with a 'buy' rating. India's defence sector, Nomura said, is witnessing significant growth driven by increasing defence budgets, modernisation efforts, and the government's emphasis on indigenous manufacturing through initiatives like 'Make in India'.