Hindustan Aeronautics rallies 5%, hits new high on strong business outlook

Shares of Hindustan Aeronautics (HAL) hit a new high of Rs 2,094 on the BSE as the stock rallied 5 per cent in Monday’s intra-day trade due to a strong outlook. The stock of the state-owned aerospace & defense company surpassed its previous high Rs 2,075 touched on August 2, 2022.

In the past one month, HAL has outperformed the market by surging 20 per cent, as compared to a 7.6 per cent rise in the S&P BSE Sensex. In the last six months, it has rallied 52 per cent, as against a 1.4 per cent gain in the benchmark index. Further, in one year, the market price of HAL has zoomed 94 per cent vs a 8 per cent upmove in the Sensex.

HAL is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures. The company has been set up to meet the requirement of Indian Defence Forces (namely Indian Airforce, Indian Navy, Indian Army and Indian Coast Guard) in the area of Aerospace.

Contributing to the “Atmanirbhar Bharat” mission, HAL has been consistently involved in developing an aerospace ecosystem for achieving self-reliance in defence.

Last month, HAL signed a contract worth over $100 million for supply and manufacture of 88 TPE331-12B engines/kits along with maintenance and support services to power the Hindustan Trainer Aircraft (HTT-40).

HAL had also announced that the company and Safran Helicopter Engines signed an agreement to create a new joint venture intended to develop helicopter engines.

Meanwhile, the board of the company is scheduled to meet on Friday, August 12, 2022 to consider financial results for the quarter ended June 2022 (Q1FY23).

For the quarter ended March 2022 (Q4FY22), HAL had reported a 90 per cent year on year (YoY) jump in consolidated net profit at Rs 3,105 crore as against a profit of Rs 1,628 crore in Q4FY21.

In the year 2022-23, defense budgets and revenues for defense contractors are expected to remain largely stable or increase, as military programs continue to be critical to national defense, especially considering geopolitical tensions.

Global defense spending is expected to grow about 2.5 per cent in 2022, as major world powers continue to strengthen their militaries in response to geopolitical tensions.

Both military and commercial aerospace sectors have good growth potentials in India. In 2022-23, the total allocation (including pensions) of the three forces was Rs 4.93 trillion, which is 94 per cent of the total defence budget.

"Thrust of the government towards domestic products for developing a self-reliant industry will bring greater opportunities for new orders. The stability of military sector during the time of crisis will entice commercial players to diversify in to military sector as risk mitigation strategy. This will bring opportunities for HAL to diversify into commercial sector by forming strategic alliance with such companies," the company said in its FY22 annual report.