HAL shares jump 18% in a week to hit all-time high; here’s why

Shares of Hindustan Aeronautics Limited (HAL), a state-owned aerospace and defence company, continued gaining streak for the fifth straight session to hit a fresh all-time high on Friday amid a spurt in volume trade. The share of the Bengaluru-headquartered state-run company gained as much as 5.98% to attain a new high of ₹1,785.85 in the intraday trade on BSE, in line with the broader market. The BSE Sensex was also up 1,068 points at 53,860 levels at the time of reporting, driven by a broad-based rally amid strong cues from Asian peers.

Earlier today, HAL shares opened with a gain of 2.67% at ₹1,730 apiece on BSE, against the previous closing price of ₹1,685.05. The stock gained momentum and rose as much as 5.98% to hit an all-time high of ₹1,785.85. The stock has rallied 18% since May 13 after the aeronautics company released its March quarter earnings report.

For the January-March quarter of 2022, HAL reported a 90.7% growth in net profit at ₹3,102 crore as against ₹1,621 crore in the year-ago period. The revenue from operations rose 6.4% to ₹11,561 crore for Q4FY22, compared with ₹10,866 crore in the same quarter last fiscal. On the operational front, the earnings before interest, taxes, depreciation, and amortisation (EBITDA) dropped 7.9% to ₹2,500 crore, versus ₹2,714 crore in Q4FY21, while the EBITDA margin slipped by 340 basis points to 21.6% on a yearly basis.

Post Q4 results, domestic brokerage ICICI Securities had maintained a “BUY” call on the stock with a target price of ₹2,618 per share, a potential upside of 55% from Thursday’s closing price. The agency valued HAL using the discounted cash flow (DCF) methodology, considering that its order book would cross ₹1 lakh crore by FY22/23E.

“HAL remains on the strategic defence public sector undertakings and (in our view) can potentially garner around 50% of Indian defence order inflow (i.e ₹2.5 lakh crore) over next 5 years. The stock remains inexpensive,” the brokerage said in a report dated May 15.

As per the report, HAL’s FY22 earnings result was above expectations for both top line as well as profitability with revenue growth of 8% YoY (higher than the provisional revenues disclosed earlier) and profit before tax (PBT) increasing 22% YoY. “Even adjusted for higher other income due to tax refund of earlier years PBT increased by 16% YoY, despite around 150% increase in provisions. Higher provisions helped to normalise what otherwise would have been 27%+ EBITDA margins for FY22,” it added.

Last month, HAL signed a pact with Israel Aerospace Industries (IAI) to convert civil (passenger) aircraft to multi-mission tanker transport (MMTT) aircraft in India. As per the deal, HAL will convert pre-owned civil (passenger) aircraft into air refueling aircraft with cargo and transport capabilities.