1:2 Stock Split: Defence Giant HAL Up By Rs 1,100 Since Ex-Split, To Pay 440% Dividend Soon; BUY Or Sell?

Hindustan Aeronautics (HAL) is a special stock price in the defence segment. Strong order inflow, expanding of export business, stable margins and consistency in double-digit earnings growth have kept HAL on the map of attraction. Currently, HAL is in focus on its upcoming dividend payout to the tune of 440%, while it is moving closer to its 52-week high levels. A multi-bagger, HAL who first went ex-split in late September last year, has nearly doubled investors' money up till now.

HAL Share Price:

On Thursday, HAL share price ended at Rs 3,004.50 apiece, up by 1.90% on BSE with a market cap of Rs 2,00,933.45 crore. The stock is closing its gap towards its 52-week high of Rs 3,130 apiece.

From its 52-week low of Rs 1,237.50 apiece, HAL shares have rallied by at least 142.78% on the exchange.

HAL Dividend Payout:

This will be the first dividend after HAL shares turned ex-split last year. Also, it is the first interim dividend for FY24. HAL shares turned ex-dividend on February 20th, for its first interim dividend of Rs 22 per share for FY24 having a face value of Rs 5 each. In percentage terms, the payout is 440%.

In FY23 alone, HAL paid up to 550% dividend amounting to Rs 55 per share.

HAL Stock Split Charm:

The defence giant's first stock split took place last year. HAL shares turned ex-split on September 28, 2023, for the ratio of 1:2. That meant HAL's share price face value was reduced to Rs 5 per share compared to earlier Rs 10 per share.

Here's how HAL shares have performed since the first stock split and how much returns it has given to investors:

Adjusting to its stock split ratio, HAL's share price turned to Rs 1,888.90 apiece on the ex-split day. So let's suppose, you held 1,000 shares of HAL before the stock split, after September 28, 2023, the number of shares will rise to 2,000 (1,000 X 2). So your number of shares gets doubled eventually. Just a day before (September 27, 2023) the stock split, 2,000 shares will be valued at Rs 38,36,560. On the ex-split day, your number of shares will be valued at Rs 37,77,800 (2,000 X 1,888.90). The reason why the value of your shares dropped on the ex-split day is that HAL's share price was down by nearly 1% on September 28, 2023, compared to its previous day's price level which was Rs 1,918.28 apiece.

If you have not modified your shareholding in HAL up till now, then your shareholding value rises to a whopping Rs 60,09,000. This has also nearly doubled for investors. If compared to the 52-week high of Rs 3,130 apiece which was touched on February 9, 2024, your shareholding value stood at Rs 62,60,000.

Coming to the performance, despite a few temporary hiccups, HAL's share price has shown a consistent upside in the broader perspective. From its ex-split day, HAL's share price is currently trading higher by Rs 1,115.6 or 59% on BSE which is an achievement in less than six months. In a year, HAL shares are up by 136.43%, becoming a multi-bagger in the defence segment.

HAL Earnings:

Standalone net profit came in at Rs 1,253.51 crore in Q3FY24, registering a growth of 8.62% from a net profit of Rs 1,153.99 crore in the same quarter a year ago. In Q2FY24, the company reported a net profit of Rs 1,235.30 crore. Meanwhile, standalone revenue also jumped to Rs 6,060.91 crore in Q3FY24, registering growth against revenue of Rs 5,665.86 crore in Q3FY23 and Rs 5,635.81 crore.

HAL Share Price Target:

HAL has already touched the target price of brokerages like Prabhudas Lilladher and Elara Securities after its Q3 earnings. In its research note, Elara last week said, "We raise our EPS by 2% for FY24E, 1% for FY25E and 4% for FY26E based on higher Other income. We revise to Accumulate from Buy, with a higher TP of INR 2,975 from INR 2,500 based on 28x (from 25x) December 2025E P/E as we roll forward. Our revised TP is driven by expectations from a new stream of the exports business, surge in inflows, stable margin, and sustained double-digit earnings growth."

Elara's note further added, "We believe the rising share of indigenization along with unexplored export opportunities in the aircraft & helicopter industry warrant a rerating. We expect an earnings CAGR of 14% during FY23-26E with a ROE of 24% during FY24-26E. Key risks to our call include lower spending in the defence capital budget, less domestic procurement allocation, increased competition from the private sector, and a significant rise in commodity prices."

Further, the leading global brokerage, CLSA is optimistic about HAL's growth trajectory and share price. The brokerage has recommended 'OUTPERFORM' on HAL for a target price of Rs 3,225 per share.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.