Rs 1,20,000 Crore Order Book: Can This Defence Aircraft Company Be The Next Maharatna PSU After Oil India Ltd? Company Signed Rs 26,000 crore contract with MoD
The stock gave multibagger returns of 135 per cent in just 1 year and a whopping 1,220 per cent in 5 years.
Hindustan Aeronautics Limited (HAL) suggests it could be the next public sector undertaking (PSU) to achieve the coveted "Maharatna" status by this year-end. This elevation would grant HAL greater operational and financial autonomy, enabling its board to make project investments up to Rs 5,000 crore without government approval. Currently, a "Navratna" PSU, HAL is allowed to invest only up to Rs 1,000 crore autonomously. The last company to be awarded the "Maharatna" status was Oil India Ltd in August 2023. India currently has 13 "Maharatna" PSUs, including BHEL, BPCL, Coal India, GAIL, HPCL, Indian Oil, NTPC, ONGC, Power Grid, SAIL, Oil India, REC, and PFC. A "Maharatna" PSU enjoys additional benefits such as the ability to undertake mergers and acquisitions domestically and internationally, offer competitive financing in their sector, and invest up to 15 per cent of their net worth in a project without government approval. Additionally, they can make foreign investments up to Rs 5,000 crore without government clearance.
Recently, the Ministry of Defence (MoD) has entered into a contract with Hindustan Aeronautics Limited (HAL) for the manufacturing of 240 AL-31FP Aero Engines for Su-30MKI aircraft, worth over Rs 26,000 crore. This contract is a major step towards achieving Aatmanirbhar Bharat in the defence sector. The aero engines will be produced by HAL's Koraput Division and are expected to meet the Indian Air Force's requirement to sustain the operational capability of its Su-30 fleet. HAL plans to enhance the indigenisation content of the aero-engines to up to 63 per cent, which will also boost the indigenous content of their repair and overhaul tasks.
In addition to the aero-engine contract, the Defence Acquisition Council (DAC) has approved 10 capital acquisition proposals worth Rs 1.45 lakh crore. These proposals include the procurement of Future Ready Combat Vehicles, Air Defence Fire Control Radars, Dornier228 aircraft, and Next Generation Fast Patrol & Offshore Patrol Vessels. The majority of the funding for these projects will be sourced domestically, highlighting India's commitment to self-reliance in defence manufacturing. Furthermore, HAL and SAFHAL Helicopter Engines Pvt Ltd have signed a contract to jointly design, develop, manufacture, supply, and support a new-generation high-power engine called 'Aravalli'. This engine will power the 13-ton Medium Lift class Indian Multi-Role Helicopter (IMRH) and the Deck-Based Multi-Role Helicopter (DBMRH). The 'Aravalli' name represents India'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.
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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 135 per cent in just 1 year and a whopping 1,220 per cent in 5 years. Investors should keep an eye on this multibagger aerospace & defence stock.
Please share your opinion in the comments: Will HAL be the next Maharatna PSU after Oil India Ltd?
Disclaimer: The article is for informational purposes only and not investment advice.
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