2:1 Stock Split & Rs 1,20,000 Crore Order Book: Defence aircraft company signs Rs 26,000 crore contract with Ministry of Defence (MoD)
The stock gave multibagger returns of 130 per cent in just 1 year and a whopping 580 per cent in 3 years.
In a major boost to Aatmanirbhar Bharat, the Ministry of Defence (MoD) has signed a contract with Hindustan Aeronautics Limited (HAL) for 240 AL-31FP Aero Engines for Su-30MKI aircraft at a cost of over Rs 26,000 crore. The contract was inked by the senior officials of MoD and HAL in the presence of Defence Secretary Shri Giridhar Aramane and Chief of the Air Staff Air Chief Marshal VR Chaudhari in New Delhi on September 09, 2024.
These aero engines will be manufactured by the Koraput Division of HAL and are expected to fulfil the need of the Indian Air Force to sustain the operational capability of the Su-30 fleet for the defence preparedness of the country. HAL would supply 30 aero-engines per annum as per the contractual delivery schedule. The supply of all 240 engines would be completed over the period of the next eight years. During the manufacturing, HAL plans to take support from the country’s defence manufacturing ecosystem, involving MSMEs and public & private industries. By the end of the delivery programme, HAL would enhance the indigenisation content by up to 63 per cent to achieve an average of over 54 per cent. This would also help increase the indigenous content of Repair and Overhaul tasks of the aero-engines.
Additionally, The Defence Acquisition Council (DAC) has approved 10 capital acquisition proposals worth Rs 1.45 lakh crore to bolster India's defence capabilities. These proposals, which include the procurement of Future Ready Combat Vehicles, Air Defence Fire Control Radars, Dornier228 aircraft, Next Generation Fast Patrol & Offshore Patrol Vessels, aim to modernize the Indian Army and Coast Guard. The majority of the funding for these projects will come from Indigenous sources, demonstrating India's commitment to self-reliance in defence manufacturing.
Earlier, HAL and SAFHAL Helicopter Engines Pvt Ltd (SAFHAL) have inked an airframer contract to jointly design, develop, manufacture, supply, and support a new-generation high-power engine named 'Aravalli'. This engine is destined to power the 13-ton Medium Lift class Indian Multi-Role Helicopter (IMRH) and the Deck-Based Multi-Role Helicopter (DBMRH), both being designed and developed by HAL. The 'Aravalli' name, inspired by India's majestic mountain range, symbolizes the nation's aspiration for self-reliance in critical engine technologies. This strategic partnership marks a significant milestone in India's aerospace and defence sector, aiming to enhance the nation's Aatmanirbharta in helicopter engine technology. Under this contract, SAFHAL will collaborate with its parent companies on cutting-edge engine technologies, ensuring superior performance, reliability, and operational efficiency. This collaboration involves state-of-the-art design, advanced manufacturing processes, and rigorous testing protocols to meet the highest global standards.
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About Hindustan Aeronautics Ltd (HAL)
Hindustan Aeronautics Limited (HAL) is a one-stop shop for India's defence aviation needs, specializing in designing, manufacturing, repairing, and maintaining aircraft, helicopters and engines, making them a critical supplier for the country's defence program.
According to its Quarterly Results, the net sales increased by 11 per cent to Rs 4,347.50 crore, operating profit increased by 34.2 per cent to Rs 1,727.06 crore and net profit increased by 76.6 per cent to Rs 1,431.11 crore in Q1FY25 compared to Q1FY24. In its annual results, the net sales increased by 12.8 per cent to Rs 30,381.1 crore, operating profit increased by 39.4 per cent to Rs 11,637.7 crore and net profit increased by 30.4 per cent to Rs 7,594.5 crore in FY24 compared to FY23.
Additionally, the shares of the company ex-traded stock split, dividing each existing Rs 10 equity share into two Rs 5 equity shares on September 28, 2023. Additionally, the company paid a final dividend of Rs 15 per share on August 24, 2023. The President of India’s portfolio owns the majority of the stake i.e., 71.64 per cent as of June 2024. The company has a market cap of Rs 3.11 lakh crore and has been maintaining a healthy dividend payout of 30 per cent.
The company's order book as of March 31, 2024, was Rs 94,000 crore. With the addition of a new order worth Rs 26,000 crore, the total order book now stands at Rs 1,20,000 crore. The stock has a PE of 38x, an ROE of 29 per cent and an ROCE of 39 per cent. The stock gave multibagger returns of 130 per cent in just 1 year and a whopping 580 per cent in 3 years. Investors should keep an eye on this multibagger aerospace & defence stock.
Disclaimer: The article is for informational purposes only and not investment advice.
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