14 May , 2024 By : Debdeep Gupta
Shares of Hindustan Aeronautics (HAL) surged over 3 percent to hit a 52-week high of Rs 4,064 per share on May 14 after global brokerage firm UBS maintained a 'buy' call on the counter and raised the target price to Rs 5,200 per share from Rs 3,600, indicating an upside of 28 percent from current levels.
UBS analysts highlighted the rationale behind the target upgrade on HAL to be led by earnings upgrade. "We believe this is justified by HAL's better order book scale-up, lower competition, and greater optionality in exports," they noted.
Over the next 6 months, HAL is well-geared to deliver 8-10 trainer plus fighter versions of the LCA-MK1A (Tejas) in FY25E, boosting manufacturing revenue. Following this, the order for 12 new SU-30 MKI aircraft, 156 LCH Prachand (combat helicopter), and 240 AL 31FP engine orders for SU-30 is expected to be delivered by FY25E.
Of the $60-billion new orders for HAL, analysts at UBS believe that almost 20-25 percent could be awarded before FY26E, given the current speed of government procurement, stronger domestic supply chain, and capacity build-up. Going ahead, they pegged a three-fold increase in HAL's order book and 25 percent revenue growth in manufacturing topline in FY23-27E.
Moreover, UBS analysts see a 'goldilocks scenario' emerging for HAL over this decade.
Factors such as the government's thrust on defense manufacturing theme, timely expansion of capacities to drive greater outsourcing to the private sector, and increased confidence in large indigenously designed and manufactured platforms will drive HAL ahead, analysts noted.
The defense major is scheduled to announce January-March quarter results on May 16, 2024.
Analysts at ICICI Securities pegged HAL's sales to increase 13.6 percent year-on-year (YoY) to Rs 14,197 crore in Q4FY24, while profit-after-tax (PAT) is expected to decline by 22 percent YoY to Rs 2,221 crore. The brokerage firm shared an 'add' rating on the counter, with a target price of Rs 3,225 per share.
So far this year, shares of HAL soared over 33 percent, outperforming benchmark Nifty 50 which rose by just 2 percent during the same period.
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