Chandrayaan 3: CLSA shares L&T, HAL & BHEL price targets, says mission a boost to 'Make in India'

CLSA on Thursday said India’s Chandrayaan 3's soft landing on moon -- the first globally on the South Pole and fourth country overall, and that at a third of the global average cost, should strengthen the ‘Make in India’ theme. It would open up global rocket, launch and satellite markets for Indian players such as Larsen & Toubro (L&T), the foreign brokerage said.

India opened its space sector for private companies in 2023 with a Hindustan Aeronautics (HAL) and L&T joint venture winning its first order to build five end-to-end polar satellite launch vehicle (PSLV) rockets.

The global space economy is primarily driven by a record number of satellite launches, technology innovations, demand for lower costs and growing communication needs, CLSA said, adding that "with its cost-competitive launch cost, India’s private ventures should help capture this market.

The global space market is pegged at $447 billion and India has less than 5 per cent share. India would soon be launching a mission for a solar observatory and put a man on the moon. Success would solidify India’s right to win in the global market and its vendors such as L&T, CLSA said.

The Chandrayaan-3 mission consisted of an indigenous lander module (LM), propulsion module (PM) and a rover with an objective of developing and demonstrating new technologies required for interplanetary missions. It also carries a Spectro-polarimetry of Habitable Planetary Earth (SHAPE) payload to make spectral and polarimetric measurements of earth from lunar orbit.

CLSA noted that L&T was involved in this mission starting from manufacturing of subsystems to mission tracking. The Titanium tanks were delivered by Bharat Heavy Electricals Limited (BHEL)

for Chandrayaan-3. Mechanical hardware work was provided by HAL for Chandrayaan-3. Paras Defence, MTAR Technologies, Linde India and Walchandnagar Industries were other listed companies contributing to the mission. 

For L&T, CLSA has 'Buy' rating with a target of Rs 3,080. The target price is based on a one-year forward PE multiple based on a 25 oer cent discount to capital goods component to derive a core E&C business value.

"The hydrocarbon business is excluded from the E&C business as per company segmentation and is valued separately using a one-year forward PE multiple. Finance, special-purpose road vehicles and other subsidiaries are valued at a multiple to the book value or at a discount to our coverage target price or Bloomberg consensus target price," it said.

Watch: Jio Financial shares hit lower circuit for 4th day straight, plunge 20% since listing; should you buy, hold or sell ahead of RIL AGM? See what analysts say

CLSA said its target price of Rs4,110 for HAL (Outperform rating) is based on an average of five valuation methodologies.

"For the first three inputs, we value HAL in relation to the average PE of the global defence, Indian defence and Indian capital goods sectors. We apply discounts to our comparable company analysis to factor in stock divestment overhang and slower near-term growth due to HAL's ultra-conservative accounting policy. As the fourth and fifth methods, we take into account HAL's three-year average EV/order book and a DCF analysis," CLSA said.

Meanwhile, CLSA said it has a 'Sell' rating on BHEL with a target of target price of Rs 78, whcih  is based on a 18 times one-year forward PE multiple for the parent business and the power utility joint venture at its 0.8 times its book value.

Also read: BHEL, Hindustan Aeronautics, Midhani: How should you trade these buzzing stocks?

Also read: Block deal: Coforge shares in focus as promoter may sell entire stake today