HAL shares can rally up to Rs 6,145, order book at all-time high: Antique

After the Cabinet Committee on Security (CCS) cleared the Sukhoi engines deal, boosting Hindustan Aeronautics (HAL)’s order book to an all-time high, Antique Stock Broking predicts the share price could rally up to Rs 6,145. This indicates a potential upside of 25% from the day’s high of Rs 4,925.

The Cabinet Committee on Security (CCS) has approved a Rs 260 billion procurement order for 240 aero engines for Su-30 MKI aircraft. This will increase Hindustan Aeronautics (HAL)’s already strong order backlog from Rs 940 billion (FY24 end) to Rs 1.2 trillion, resulting in strong revenue visibility of 3.8 times its trailing twelve months (TTM) revenue.

Although near-term financials may be volatile due to supply chain challenges in executing the large Tejas MK I A orders, the stock is considered attractively valued. With multi-year double-digit earnings growth potential and a robust return ratio profile of over 20%, the report retains a BUY rating with a target price of Rs 6,145, valuing the company at a PE ratio of 45x 1HFY27E earnings.

The report also highlighted a robust order pipeline, with orders worth Rs 480 billion for ALH (25), LUH (12), Su-30 (12), and RD-33 engines (80) in the advanced stages of finalization and expected to materialize soon. Additionally, an order worth Rs 180 billion is anticipated on the RoH front.

In the last six months, the stock has delivered a return of 48%, and approximately 138% over the past 12 months. However, it has posted a negative return of 11% in the last three months.Commenting on FY25 operational performance, the report indicated that it might experience moderation due to supply chain challenges. A delay in the supply front has impacted the execution of a large order worth Rs 480 billion, contributing to this expected moderation.“Industry experts suggest that FY25 might see the delivery of eight Tejas MK I A aircraft with a few of them being delivered with CAT B engines and the expectation is that GE might start delivery of two engines every month from Dec 2024 (the earlier expectation was for Sep 2024). This could impact FY25 revenue booking to mid-high single digit as against its guidance of 15% for FY25.”HAL has entered into a MoU with GE that will help it produce fighter jet engines in India. Additionally, HAL is also working on a joint venture (JV) with Safran to co-develop and co-produce turboshaft engines in India with immediate focus on Indian Multi Role Helicopter (IMRH) and Deck-Based Multi-Role Helicopters (DBMRH), said report.