Rs 5,00,00,00,00,000 New Order: Defence PSU HAL Wins Massive Order For Terror Choppers; BUY/Sell Its Stock?

Defence giant with Navratna status, Hindustan Aeronautics (HAL) has confirmed winning of 156 Light Combat Helicopter orders from the Defence Ministry. As per reports, this new order is the largest single-order in HAL and is reportedly worth Rs 50,000 Crore. HAL share price will be in focus accordingly.

In its regulatory filing, HAL said that a Request for Proposal (RFP) has been issued by the Ministry of Defence for the procurement of 156 Light Combat Helicopters.

Of the total, HAL said that 90 of them are for the Indian Army (IA), and the rest of the 66 LCH will be delivered to the Indian Air Force (IAF).

A request for proposal (RFP) is a document that solicits a proposal, often made through a bidding process, by an agency or company interested in procurement of a commodity, service, or valuable asset, to potential suppliers to submit business proposals, as per Wikipedia.

As per the Economic Times, the order book is approximately Rs 50,000 crore, which is also the largest single order given for the acquisition of choppers to an Indian company. Also, the report said that this order will pave the way for HAL to offer a techno-commercial bid that will then be negotiated with the defence ministry before being finalised.

Light Combat Helicopter (LCH) was proposed to meet IAF's requirement of a dedicated light helicopter for combat operations. LCH has the maximum possible commonality with ALH. LCH with a narrow fuselage has a pilot and co-pilot/gunner in tandem configuration incorporating several stealth features, Armour protection, Night attack capability and crash-worthy landing gear for better survivability.

Earlier this year, in April, the ministry had issued a tender to the HAL for buying 97 LCA Mark 1A fighter jets which was expected to be more than Rs 65,000 crore.

On June 14, last week, HAL share price ended at Rs 5199.60 apiece, up by 1.9% on BSE with a market cap of Rs 3,47,736.25 crore. HAL is the largest defence company in terms of market value. YTD, HAL stock is up by 84%.

Should you buy HAL stock? As per the Trendline data, the consensus recommendation from 13 analysts for Hindustan Aeronautics Ltd. is BUY.

Also,after its Q4 results, global brokerages like Jefferies have recommended BUY on HAL while raising their target prices to Rs 5,725, which is the highest target on the stock so far. According to Jefferies, HAL may see double-digit revenue growth for 4-6 years due to its higher margin service income and aircraft deliveries. Also, HAL's export visibility is improving, while its current margin focuses on cost optimisation which is positive for the company.

In FY24, HAL recorded the highest-ever revenue from operations of over Rs. 29,810 crores (provisional and unaudited), registering a double-digit growth of around 11% as against 9% in the previous financial year. The corresponding figure for the previous year was Rs. 26,928 crores.

Also, in FY24, HAL received fresh manufacturing contracts of over Rs 19,000 crores and ROH contracts of over Rs 16,000 crores during FY 2023-24.

In April, HAL revealed that it completed its maiden flight of LCA Mk1A. Also, in FY24, HAL and General Electric, USA signed an MoU for ToT and Manufacturing of GE-414 aero-engine in India for LCA MK2 Aircraft. The Company would receive 80% technology transfer for this program which would transform the Indian Aero Engine Manufacturing Ecosystem to be self-reliant.

HAL with a robust order book and accelerated delivery plan is expected to sustain and improve the growth trajectory and support the Indian Defence services in their endeavour towards Defence preparedness of the country, it said.