Investing in defence shares offers financial growth due to its steady demand, government backing, and long-term contractual commitments. Listed below is a Defence stock which is the Indian government’s prime manufacturer of defence machinery in the Aeronautic segment, that you can add to your watchlist/ portfolio
Price Action
With a market capitalization of Rs. 2,97,394 Crores, the shares of Hindustan Aeronautics Limited closed at Rs. 4,446.85 per equity share, down 0.76 percent from its previous day’s close price of Rs. 4,481.10.
About the Company
Hindustan Aeronautics Limited (HAL) is the Indian government’s prime manufacturer of defence machinery in the Aeronautic segment. It designs, develops, manufactures, maintains, and upgrades aircraft, helicopters, and critical aerospace components & accessories.
It has more than 20 production facilities and 10 sites dedicated to research and development co-located with the production premises. These divisions/centers are spread across nine geographic locations in seven states of the country.
It also has multiple successful partnerships with Air Mauritius, Rolls Royce, Honeywell, and Israel Aerospace. HAL has partnered with Rolls Royce and has ongoing contracts focused on manufacturing and maintaining Adour engines for the aircraft and their components supporting both Indian and international military customers, along with other collaborative research and development.
Orderbook
As of Q1FY25, Hindustan Aeronautics Limited has a strong order book of Rs. 94,000 Crores and the management of the company expects to increase it to Rs. 1,20,000 Crores by the end of the fiscal year.
The future order pipeline of HAL looks promising with anticipated contracts for LCA Mark 1A, Domier Aircrafts, Utility Helicopter Marine, Advanced Light Helicopter, and many others expected to be somewhere around Rs.1,60,000 – 1,70,000 crores, and it aims to materialize it in the next 3 years time frame
Capex
Hindustan Aeronautics Limited (HAL) has plans to invest in various greenfield projects and capacity augmentation of various programs with an estimated CAPEX plan between Rs.14,000 – 15,000 crores for the next 5 years, taking an average CAPEX of almost Rs. 3,000 crores on annual basis.
Financials & Ratios
Its Revenue from operations grew by 11 percent YoY from Rs. 3,915 Crores in Q1FY24 to Rs. 4,348 Crores in Q1FY25, accompanied by profits of Rs. 814 Crores to Rs. 1,436 Crores.
In terms of Return ratios, it has reported a return on equity (ROE) of 28.9 percent and a return on capital employed (ROCE) of 38.9 percent. It is a debt-free company with a debt-to-equity ratio of 0.
Written by: Bharath K.S
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