Hindustan Aeronautics crosses Rs 2 lakh crore market cap; Stock hits 52-week high

Hindustan Aeronautics Limited (HAL) has witnessed a significant market cap surge, crossing Rs 2,00,000 crore, following UBS’s initiation of coverage. The stock hit its 52-week high price of Rs 3,079 which reflects the market’s positive response to UBS’s comprehensive report on HAL’s growth potential.

UBS Report Highlights

UBS’s coverage report sheds light on HAL’s sharpened policy focus, envisioning a compressed US$ 60 billion opportunity within 5-7 years. The report underscores HAL’s US$ 10 billion-plus order book, projecting additional defence aircraft orders amounting to US$ 60 billion until FY28E. Of this, US$ 16 billion has already been approved, with expectations of over US$ 40 billion in the next 5-7 years, emphasizing higher local content.

The catalysts identified by UBS include HAL’s military aircraft monopoly, a faster capability build-up, and robust domestic supply chains. The strategic push and favourable policies lead UBS to initiate a ‘Buy’ rating, anticipating a re-rating akin to BHEL’s trajectory over the past decade.

Moving Towards Aatmanirbharta

HAL, established in 1940, stands as one of the world’s oldest and largest aerospace and defence manufacturers. UBS forecasts a threefold increase in HAL’s order book to Rs 2.4 lakh crore in FY26, underpinned by heightened defence expenditure, evident in the recent budget allocation of Rs 5.94 lakh crore.

The aerospace giant has expanded its Tejas Mk1A fighter aircraft manufacturing capacity and rotary wing platform production to meet growing demand. Importantly, HAL is reducing dependence on imports, with the import component decreasing from 85% in FY13 to 77% presently.

New Orders and Global Prospects

The Ministry of Defence’s recent approvals, including Light Combat Helicopters (LCH) for the Indian Air Force and Indian Army, Light Combat Aircraft (LCA) Mk 1A for IAF, and indigenous upgrades for Su-30 MKI aircraft, contribute significantly to HAL’s order pipeline.

Internationally, HAL is in negotiations for export orders with four countries, including Argentina, Nigeria, Egypt, and the Philippines, potentially worth close to Rs 70,000 crore. These orders reflect HAL’s global competitiveness and its potential to contribute to India’s defence manufacturing on the world stage.

Strategic Alliances

HAL’s foray into Maintenance, Repair, and Operations (MRO) solutions for the A-320 series of aircraft is a strategic move to enhance integrated MRO services in India. The partnership aims to provide commercial airlines with a one-stop MRO solution, fostering growth in India’s commercial aviation industry.

Additionally, HAL has ventured into a joint venture to design, develop, certify, produce, sell, and support helicopter engines. These engines, intended for use in the Indian multi-role helicopter (IMRH) and its deck-based version, are expected to commence production in four years, showcasing HAL’s commitment to indigenous capabilities.

HAL’s Vision for the Future

HAL’s commitment to indigenization is evidenced by its shift from waiting for orders to developing in-demand products. With identified indigenization programs and an initial budget of Rs 1,800 crore, HAL is creating additional capacity for engines, avionics, and accessories. This aligns with the government’s push for self-reliance in defence, aiming to reduce dependence on foreign countries.

Conclusion

In conclusion, HAL’s recent market cap milestone, backed by UBS’s positive coverage, underscores the aerospace giant’s pivotal role in India’s defence landscape. With a strategic focus on indigenization, global competitiveness, and a robust order book, HAL is poised for sustained growth. As India propels towards Aatmanirbharta in defence manufacturing, HAL’s trajectory mirrors a commitment to innovation, self-reliance, and global prominence. Investors and industry enthusiasts should keep a watchful eye on HAL’s dynamic journey, as it unfolds against the backdrop of transformative policy shifts and global geopolitical considerations.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.