 "Hindustan Aeronautics")
Shares of Hindustan Aeronautics Ltd (HAL) hit a new high of Rs 4,064, as they rallied 4 per cent on the BSE in Tuesday’s intra-day trade after the brokerage firm UBS raise price target of the stock from Rs 3,600 to Rs 5,200 led by earnings upgrade, roll forward and increased target PE, from 32x to 40x. Analysts believes this is justified by HAL's better order book scale up, lower competition and greater optionality in exports.
The stock of state-owned defence company has surpassed its previous high of Rs 4,045.20. Since November, the market price of HAL has been more than doubled or zoomed 123 per cent. While, since September 28, 2023, it rallied 115 per cent after the stock split in the ratio of 1:1.
The stock is inching towards 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.
HAL, one of the largest Defence PSU in India, is engaged in design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aeroengines, 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 expect 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 scenarios), implying a quadrupling of the order book by FY28E, led by the government's faster decision-making and shorter turnaround.
“The governments 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 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."
As on March 31, 2024, HAL's order book stands in excess of Rs 94,000 crore with additional major orders expected during FY 2024-25.
Despite the major supply chain challenges arising due to geopolitical issues, the Company has met the expected revenue growth with improved performance for the financial year 2023-24 (FY24). HAL recorded the highest ever revenue from operations of over Rs 29,810 crore (provisional and unaudited) for FY24 registering a double digit growth of around 11 per cent as against 9 per cent in FY23.
Meanwhile, the board of directors of HAL is schedule to meet on Thursday, May 16, 2024, to consider and approve the audited financial results of the company, for the quarter and year ended March 31, 2024.
