The shares of India’s largest aerospace and defence manufacturer gained over 6 percent after UBS initiated “buy” coverage on the stock.
At 1:05 p.m, the company shares were trading at Rs 3,002 per share, up 3.31 percent from the previous closing price. The company shares reached a 52-week high price of Rs 3,078.85 per share.
On Friday, the company’s stock market capitalization crossed the mark of Rs 2 lakh crore for the first time, from the time of listing in 2018.
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 61 percent in the last six months and 139 percent in a year. The company has a market capitalization of Rs 2,00,749 crores.
As per the CNBC TV 18 report, UBS has given a buy call on Hindustan Aeronautics Ltd for a target of Rs 3,600 per share with an upside of 20 percent based on Friday’s trading price of Rs 3,002 per share. The rationale behind such recommendation is,
● HAL’s order book stood at Rs 80,000 crore in FY23, and UBS expects it to quadruple to Rs 2.4 lakh crore in FY26 as defence spending rises. In contrast to the 2023-24 Budget, the defence sector received an invetsment Rs 5.94 lakh crore, a 13 percent increase over the previous year.
● Brokerage highlighted that HAL has expanded its Tejas Mk1A fighter aircraft manufacturing capacity from eight to 16 per year and taken it to 24. ● The company has expanded its rotary wing platform’s manufacturing capacity to meet the growing demand for locally designed and manufactured aircraft. ● The brokerage believes consensus estimates, that HAL has not yet built in faster order completions, based on its ability to ramp up production and improve manufacturing capabilities.
● Over the fiscal year 2023-2026, UBS anticipates a compound annual Growth Rate (CAGR) of 16% in sales and 18% in net profit, with a Return on Equity of 20%. Furthermore, UBS anticipates increased local content and lower
personnel expenses to underpin EBITDA margins.
● HAL has been reducing its reliance on imports. Its import component is at 77 percent, down from 85 percent in FY13. “Several HAL-designed aircraft platforms, such as Tejas Mk1A, are gaining acceptance from the Indian military,” UBS stated in a press release.
“UBS expects the depletion of India’s military aircraft strength in the coming few years, geopolitics, and a need for greater aircraft availability to accelerate ordering and lead to a manufacturing ramp-up at HAL versus the past decade,”
Written by Omkar Chitnis
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