The shares of India’s largest aerospace and defence manufacturer gained 4 percent after UBS initiated “buy” coverage on the stock with an upside of 28%.
At 3:25 p.m, Hindustan Aeronautics shares were trading at Rs 4,074 per share, up 3.87 percent from the previous closing price. The company shares reached a 52-week high price of Rs 4,087.05 per share.
Hindustan Aeronautics Ltd(HAL) is engaged in the business of manufacturing Aircraft and Helicopters and Repair and maintenance of Aircraft and Helicopters. HAL is the largest defence PSU and Navratna corporation under the Ministry of Defence’s Department of Defence Production.
Hindustan Aeronautics Ltd shares have gained 95 percent in the last six months and 170 percent in a year. The company has a market capitalization of Rs 2,71,269 crores.
The company’s revenue saw a 7 percent year-on-year increase, climbing from ₹5,666 crore in Q3FY23 to ₹6,061 crore in Q3FY24. However, during the same period, net profit experienced a decline of 8.7 percent, from ₹1,154 crore to ₹1,254 crore.
International brokerage firm, UBS has given a buy call on Hindustan Aeronautics Ltd for a target of Rs 5,200 per share with an upside of 28 percent based on Tuesday’s trading price of Rs 4,074 per share. The rationale behind such recommendation is,
UBS anticipates that HAL’s order book will triple by the financial year 2027, with revenue in the manufacturing business expected to grow by 25% over the same period. The manufacturing business constitutes half of HAL’s overall revenue.
In the upcoming six months, HAL is poised to deliver 8-10 trainer and fighter versions of the LCA-MK1A (Tejas) in FY25E, thereby boosting manufacturing revenue. Subsequently, deliveries are projected for 12 new SU-30 MKI aircraft, 156 LCH Prachand (combat helicopter), and 240 AL 31FP engine orders for SU-30 by FY25E.UBS reported.
Analysts at UBS estimate that approximately 20-25% of the $60 billion in new orders for HAL could be awarded before FY26E, given the current pace of government procurement, reinforced domestic supply chain, and capacity expansion. Looking ahead, they forecast a threefold increase in HAL’s order book and a 25% revenue growth in manufacturing revenue for FY23-27E.
Analysts at UBS anticipate a ‘goldilocks scenario’ unfolding for HAL throughout the coming decade. In conjunction with raising their price target on HAL, UBS has also elevated its target price-to-earnings ratio from 32 times to 40 times, representing a 25% premium over Bharat Electronics’ valuation multiple.
They attribute HAL’s projected growth to several factors, including the government’s emphasis on defense manufacturing, timely capacity expansions fostering increased outsourcing to the private sector, and growing confidence in large domestically conceived and produced platforms.
Written by Omkar Chitnis
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