Shares of Hindustan Aeronautics Ltd., a public-sector enterprise with Navaratna status administered by the Indian government's Ministry of Defense, have rallied 45.12 per cent so far in 2022. The defence stock has outperformed the benchmark Nifty50 by gaining 73.2% in the last one year, as compared to a 0.83 per cent rise in the Nifty50. Further, the stock gained by 76.54 per cent from its 52-week low of ₹1,010.
The stock has risen 26.59 per cent in the last three months. Further, over the last 3 years, the market price of the stock has zoomed by 149.22 per cent.
The stock is currently trading near its 52-week high of Rs. 1,972.6 which it last reached on June 17, 2022, and it is 10.60% away from its 52-week high using Wednesday's closing price of Rs. 1,783.70.
Domestic brokerage firm ICICI Securities is bullish on the stock and has set a target price of ₹2,200, which would represent a new high for the stock and a possible gain of 22% from the previous closing price.
ICICI Securities expects HAL to deliver revenue and EBITDA CAGR of 6.8% and 11.8%, respectively, in FY22–24E and PBT to grow at a 7.7% CAGR during FY22–24E. An increase in profitability with strong asset turnover is expected to result in healthy return ratios over FY23–24E.
"HAL would start delivering double-digit revenue growth from FY25E onwards. Moreover, a healthy balance sheet, an improvement in the working capital cycle and strong return ratios make HAL an attractive investment, "said ICICI Securities.
The stock is trading at an attractive valuation of 13.x on FY24E earnings at the CMP, which is more than 30% lower than Bharat Electronics (BEL) valuations, it said.
Further, the brokerage firm said that the company will benefit from the government’s indigenisation push in the defence sector. Considering the country’s need to spend more on defence modernisation and faster procurement of defence equipment through indigenisation, an increase in capital outlay in defence is necessary, which is also visible through government actions.
HAL is looking to increase exports over the coming years. Currently, HAL's export revenue is just 0.6% of total revenues.
HAL’s FY22 closing order book was at ₹82,513 crore. The company received orders worth ₹76,306 crore in the last two years (FY21 & FY22), of which over 50% of ₹40,263 crore of orders were from the manufacturing segment (led by orders received in FY21 for 83 Tejas LCA MK1A and 15 light combat helicopters in FY22). Repair & overhaul segment order inflows were at ₹27,996 crore in the last two years, while ₹2,774 crore worth of orders were received from the development segment during the period, according to ICICI securities.
| Consolidated Financials( ₹in Cr) | Mar-22 | Dec-21 | Sep-21 | Jun-21 |
| Total Revenue | 12,061.8 | 6,088.7 | 5,688.5 | 1,766 |
| Operating Expenses | 9,061.3 | 4,465.3 | 4,311.4 | 1,373.4 |
| Operating Profit | 2,499.8 | 1,426.6 | 1,239.7 | 242.4 |
| Profit Before Tax | 2,575.9 | 1,249.1 | 1,133.4 | 266.4 |
| Tax | -528.1 | 313.8 | 289.5 | 69.4 |
| Net Profit | 3,103.2 | 933.4 | 846.8 | 194.7 |
HAL reported a 91.4 per cent surge in net profit at ₹3,103.2 crore for the quarter ended March 31, 2022, as against a net profit of ₹1621.29 crore in the year-ago period.
Revenue from operations increased by 6.4% to ₹12,061.8 crore in the current fiscal quarter, compared to ₹10,866.5 crore in the previous fiscal quarter.
Further, HAL has become debt-free for the first time in 5 years and its annual revenue growth of 10.78% outperformed its 3-year CAGR of 7.82%.
Hindustan Aeronautics (HAL), the largest defence PSU in India, is engaged in the design, development, manufacture, repair, overhaul, upgrade, and servicing of a wide range of products including aircraft, helicopters, aero-engines, avionics, accessories, and aerospace structures.
An average of 04 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
