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This PSU defence stock has zoomed over 100% in 7 months post split

In the past seven months, the share price of public sector undertaking (PSU) defence company has zoomed 112 per cent after the stock split in the ratio of 1:1

HAL, Hindustan Aeronautics Ltd

Photo: @HALHQBLR Twitter

Deepak Korgaonkar Mumbai

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Hindustan Aeronautics Ltd (HAL) shares hit a new high of Rs 3,989.30, as they surged 5 per cent on the BSE in Wednesday’s intra-day trade amid heavy volumes on strong outlook. 

In the past seven months, the share price of public sector undertaking (PSU) defence company has zoomed 112 per cent after the stock split in the ratio of 1:1. 

The stock is inching towards pre-split high of Rs 4,180 touched on September 11, 2023. On September 28, 2023, HAL sub-divided the face value of equity shares from Rs 10 into Rs 5, to enhance the liquidity of company's equity shares at the stock market and to encourage participation of retail investors by making equity shares of the company more affordable.

At 12:23 pm; HAL was trading 5 per cent higher at Rs 3,982, as compared to 0.41 per cent rise in the S&P BSE Sensex. 

The average trading volumes on the counter jumped more than two fold. A combined 3.1 million equity shares have changed hands on the NSE and BSE.

HAL, one of the largest Defence PSU in India, is engaged in design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aeroengines, avionics, accessories and aerospace structures.

In the past six trading days, HAL rallied 10 per cent after the media reported that the company bagged an order for 97 Tejas Fighter Jets from the Defence Ministry.

The company said Acceptance of Necessity (AON) was accorded by Defence Acquisition Council (DAC), in November 2023, for procurement of LCA Tejas MK1A aircraft from HAL. Subsequently, HAL received a Request for Proposal (RFP) for 97 LCA Tejas MK1A aircraft in April 2024. On submission of price bids by HAL, contract negotiations would be held with the customer and subsequently the contract with IAF would be concluded.

Since, only RFP has been received by the company, and the process as explained above needs to be followed before conclusion of the contract, HAL said while clarifying in a news report.

Meanwhile, last month, HAL signed a contract with Cochin Shipyard for supply of 6 sets of LM2500 Gas Turbines (GT) and GT Auxiliaries (GTAE), spares, and tools for the Indian Navy Next Generation Missile Vessei (NGMV) project. 

The contract size is Rs 1,173.42 crore to be executed between the financial years 2025-26 to financial year 2028-29.

The Ministry of Defence signed a contract with the HAL on March 15, 2024 for Mid Life Upgrade (MLU) of 25 Dornier Aircraft along with associated equipment for the Indian Navy at a cost of around Rs 2,890 crore.

HAL’s order backlog is estimated at around Rs 1 trillion (3 times TTM revenue), of which approximately 75 per cent is contributed by manufacturing contracts (led by large scale orders like Tejas Mk1A fighter jets, helicopters, engines) and approximately 23 per cent by repair & overhaul contracts. The strong order-book position provides healthy revenue growth visibility over the next 3 years, according to analysts.

As per the estimates, approximately Rs 2 trillion worth of contracts are expected to be placed with HAL in the coming 3-4 years. Additionally, there are a number of large-scale contracts which will be placed with HAL or the company will play a key role in the supply chain in some projects. 

This pipeline of projects gives longer term visibility to the company in terms of manufacturing order inflows and thus revenue growth in the coming years, analysts at ICICI Securities said in a stock update.

Moreover, RoH contracts to the tune of approximately Rs 20,000 crore on an annual basis are expected to be placed with the company, considering the increasing need of repair & maintenance for existing and future platforms, the brokerage firm said. The stock however, is trading above the target price of Rs 3,660 per share.

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First Published: Apr 24 2024 | 1:02 PM IST

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