Top Broking Firm Bullish On Defence Sector PSU Stock, Recommends "Buy" For 38% Upside

ICICI Direct has a "Buy" on Hindustan Aeronautics Ltd. (HAL) with a target price of Rs 3300/share. The brokerage claims a potential upside of Rs 38% from its current level if you purchase the stock at the current market price. It is a Large cap Defence sector Navratna PSU Stock. Below are the key takeaways from the report about the stock:

Stock Overview & Performance Over the Past 5 years

The stock of Hindustan Aeronautics on NSE last traded at Rs 2,402.95 apiece. The stock has gained 2.69% in the past 1 week. However, it declined 3.08% in the past 1 month and 1.16% in the past 3 months, respectively. It gave 71.9% positive return in the past 1 year. It gave 209.8% positive return in the past 3 years.

The stock recorded its 52 week high on 6 December 2022 at Rs 2,811.80 apiece and 52 week low on 24 February 2022 at Rs 1,240 apiece, respectively. It has a market capitalisation of Rs 80,351.64 crore

 

Q3FY23 Result

According to the brokerage, EBITDA margins contracted on higher provisions. Revenue declined 3.8% YoY to Rs 5665.5 crore on higher base. Sequentially, revenue increased 10.1%. The EBITDA margin contracted 682 bps YoY to 17.4% on higher provisions; leading to EBITDA de-growth of 30.9% YoY to Rs 985.4 crore. PAT rose 23.8% YoY to Rs 1155.2 crore (due to tax refunds of Rs 427.4 crore)

 

Buy for a target price of Rs 3300/share

ICICI Direct said, "We expect HAL to deliver revenue and EBITDA CAGR of 10.3% and 14.8%, respectively, over FY22-25E. PAT is likely to grow at 11.9% CAGR (FY21-25E). Increase in profitability with strong asset turnover is expected to result in healthy return ratios over FY23-25E. We continue to remain positive and retain our BUY rating on the stock. We value HAL at Rs 3300 i.e. 20x PE on FY25E EPS."

 

Key triggers for future price performance

• Healthy order book position (Rs 84000 crore; 3.2x TTM revenues) led by large scale orders in manufacturing aircraft/helicopters (LCA, LCH, ALH).
• Continuous order inflows in maintenance, repair & overhaul (MRO) with strong order pipeline in manufacturing for the next three to four years (led by LUH, LCH, ALH, Dornier, HTT-40 and engines for Su-30 & MiG-29).
• LCA Tejas MK1A, largest order in manufacturing, deliveries to IAF expected from FY24E end. Moreover, execution of other key orders and sustained growth in MRO to drive revenue growth in double digits from FY25E.

 

 

About - Hindustan Aeronautics Ltd. (HAL)

Hindustan Aeronautics (HAL), the largest defence PSU in India, is engaged in 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 delivered revenue, EBITDA and PAT CAGR of 7.4%, 12% and 26.5%, respectively, in FY18-22. In FY22, repair & overhaul contributed ~64% to total revenues while manufacturing contributed~30%.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.