NB Explains | HAL stocks soar, emerge among top performers

New Delhi, Jul 24: Over the past five years, the shares of Hindustan Aeronautics Limited ( HAL ) have shown a fourfold jump. Prices of the public sector aerospace and defence company's stock shares are currently trading at Rs 3904.85 against Rs 800 in the year 2018.

 

 

 

Amidst a push for indigenous defence manufacturing in the country, the premier aerospace and defence company in India has surged and it has now emerged as a formidable player in the bourses. Market analysts have expressed optimism regarding HAL's stock trajectory, citing the company's strong order book and high revenue growth potential as key drivers.

 

Stocks of all defence manufacturing companies in India have seen a substantial uptick in their shares. The Bengaluru-headquartered HAL, which was established in December 1940 is one of the oldest and largest aerospace and defence manufacturers in the world. According to Gaurang Shah, Senior Vice President at Geojit Financial Services “The company Hindustan Aeronautics Limited is into basic manufacturing of indigenous built light combat aircraft and light combat helicopters. They have got large orders from the Indian Air Force as well as from the overseas market.”

 

 

“We had a subscribe recommendation when the IPO was announced and the company stands to gain going forward in the future with a lot of orders coming domestically as well as globally,” he said. It is to be noted that during the recent visit of Prime Minister Narendra Modi to the US, a memorandum of understanding was signed between GE Aerospace and HAL for co-production of F414 jet engines for the Indian Air Force.

HAL is making strategic moves to boost liquidity in the stock market, as the company contemplates a sub-division of its equity shares. This decision comes as HAL shares touched a 5 year high after recording an impressive 14 per cent gain in the past five days. “Foreign institutional investors raising their holding in HAL and India’s indigenous defence manufacturing are driving its share prices,” said Mumbai-based Ajay Kedia and head of Kedia Advisory.

 

 

 

 

Over the short-term (2 to 3 month), the target of HAL shares is Rs 4,200. On the downside, the support is Rs 3,600. The central government has set the target of achieving indigenous defence manufacturing worth Rs 175,000 crore including defence exports of Rs 35,000 crore by the year 2024-25. The government has taken several policy initiatives in the past few years and brought in reforms to encourage indigenous design, development and manufacture of defence equipment, thereby promoting self-reliance in defence manufacturing.

 

 

The government has announced several lists of defence items that can only be procured from domestic sources as per provisions given in Defence Acquisition Procedure (DAP) 2020. Union Minister Rajeev Chandrasekhar had recently tweeted, “During PM Narendra Modi's tenure, various Government Public Sector Units, Banks, and other entities have shown significant growth, expansion, and competitiveness, akin to the remarkable five-fold increase in Hindustan Aeronautics Limited shares.”

Meanwhile, HAL’s soaring stock performance have generated positive sentiments among investors and market analysts alike. HAL has been at the forefront of the Indian aviation industry, delivering cutting-edge aircraft, helicopters, and related systems to both domestic and international customers. It has been at the forefront of manufacturing helicopters and trainer aircraft for the Indian defence forces, built aerostructures for the Indian Space Reseasrch Organisation (ISRO).

 

 

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