HAL Trades Near its 52-Week High, Doubles Investors' Money in a Year; More Upside Seen

Stocks to Buy: The share price of Hindustan Aeronautics jumped on Thursday and were trading near 52-week high, after the aerospace and defence company sealed a deal worth Rs 6,800 crore with the defence ministry. The stock has potential to rally further, analysts suggest an estimate of 14 per cent upside from the current levels.

The stock gained investor attention after the government signed contracts with HAL and L&T for procurement of 70 HTT-40 Basic Trainer Aircraft & three Cadet Training Ships, respectively.

“Ministry of Defence, on March 07, 2023, signed contracts with Hindustan Aeronautics Limited (HAL) and Larsen & Toubro Limited (L&T) for procurement of 70 HTT-40 Basic Trainer Aircraft & three Cadet Training Ships respectively in the presence of Raksha Mantri Shri Rajnath Singh in New Delhi. Defence Secretary Shri Giridhar Aramane along with other senior civil & military officials of MoD and representatives of HAL & L&T were present during the signing and exchanging of contracts,” HAL said in an exchange filing.

The government earlier this month approved an order worth Rs 6,800 crore for HAL and an order worth more than Rs 3,100 crore for L&T to boost the ‘Make in India’ initiative.

“In a major boost to the Government’s efforts to achieve ‘Aatmanirbharta’ in defence, the Union Cabinet had, on March 01, 2023, approved the procurement of 70 HTT-40 trainer aircraft from HAL at a cost of over Rs 6,800 crore. The Cabinet had also cleared signing of the contract with L&T for acquisition of three Cadet Training Ships from L&T, worth more than Rs 3,100 crore under Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)} category,” said the filing.

Hindustan Aeronautics, incorporated in the year 1963, is a Large Cap company operating in the Defence sector.

For the quarter ended 31-12-2022, the company has reported a Consolidated Total Income of Rs 6162.72 Crore, up 14.04 per cent from last quarter’s Total Income of Rs 5403.86 Crore and up 1.22 per cent from last year’s same quarter Total Income of Rs 6088.66 Crore. The company reported a net profit after tax of Rs 1153.92 Crore in the latest quarter.

The company’s top management includes Mr.R Madhavan, Mr.C B Ananthakrishnan, Dr.Divya Gupta, Mr.Deepak Abasaheb Shinde, Mr.Alok Verma, Mr.E P Jayadeva, Mr.Arup Chatterjee, Mr.Chandraker Bharti, Dr.(Ms.)Tessy Thomas. Company has Maharaj N R Suresh & Co. as its auditors. As on 31-12-2022, the company has a total of 33 Crore shares outstanding.

What Should Investors Do Now?

The defence sector has regained upward momentum after forming a higher base over past three-four months. Within the space, domestic brokerage house ICICI Direct says HAL has been the resilient candidate which has logged a resolute breakout from three months consolidation (2800-2300), indicating resumption of primary up trend.

The brokerage, in a report, said it offers a fresh entry opportunity to ride the next leg of the up move.

The brokerage has initiated a “Buy” action on Hindustan Aeronautics with a buying range between Rs 2,785-2,835 and a target price of Rs 3,240. This represents an upside of 14 per cent and the time frame given is 3 months. Stop loss can be kept at Rs 2,580.

“HAL has a healthy order-book position of | 84000 crore as of December 2022 (3.2x TTM revenues) led by large scale orders in manufacturing segment (Light Combat Aircraft Tejas MK1, HTT-40 Light Combat Helicopters, Advanced Light Helicopters) and engines,” the brokerage said.

It expects HAL to deliver revenue and EBITDA CAGR of 10.3 per cent and 14.8 per cent, respectively, over FY22-25E. PAT is likely to grow at 12 per cent CAGR over the same period. Increase in profitability with strong asset turnover is expected to result in healthy return ratios over FY23-25.

“Key point to highlight is that the stock has formed a higher base above 100 day’s EMA and subsequently witnessed a faster pace of retracement wherein it retraced the preceding 10 week’s decline in just four weeks, highlighting the robust price structure,” the report said.

HAL shares touched a lifetime high of Rs 2,887.5 apiece on 8 March. The stock is up more than 112.95 per cent in a year’s period.

Read all the Latest Business News here