HAL shares rise ahead of board meet on stock split, dividend. What analysts say on defence stock

Shares of Hindustan Aeronautics (HAL) gained in Tuesday's session ahead of its board meet on stock split. The stock also gained as the company board would consider paying a final dividend for FY23 today. The stock, which has surged 25 per cent in the last one month on order wins, rose 1.88 per cent to hit a high of Rs 3,770 on BSE. At this price, the stock trades at 21 times its estimated FY25 earnings per share (EPS).

The company had on June 8 informed stock exchanges about the board meet on stock split. The PSU on July 19 said it will also consider, inter-alia, the recommendation of final dividend for the financial year 2022-23.

Brokerages are largely positive on HAL, given its order backlog of Rs 82,000 crore and robust order pipeline of over Rs 1,50,000 crore in the long term.

"Fructification of probable MOU with General Electric (GE) for fighter jet engines would pave the way for further technology transfer/absorption from countries like U.S. and could be a key growth catalyst.

The company expects double-digit revenue growth from FY2025E when deliveries of LCA Tejas MK1A kick in.

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The company aims 14 per cent revenue growth from FY2026E," said Sharekhan in a note, adding that Analysts noted that HAL has a healthy cash balance of over Rs 20,000 crore.

The brokerage said advancement of potential partnerships with countries like Argentina would boost exports in the long term, as i estimated sales growth of 9.8 per cent and profit growth of 11.4m per cent  compounded annually over FY2023-FY2025.

Antique Stock Broking said it remains confident of HAL’s business prospects, given India is in the midst

of modernising its armed forces due to obsolescence and the geopolitical situation. This should lead to strong ordering for fighter aircrafts and helicopters, along with developing their respective engines and accessories, it said.

"Areas in which HAL enjoys a strong position given its capabilities and those which it manufactures under license from foreign OEMs. Success in procuring orders from friendly countries can also significantly boost its

growth outlook. We maintain BUY rating," it said while suggesting a target of Rs 4,115. Sharekhan sees 15 per cent upside for the stock.

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