Hindustan Aeronautics Share Price Could Reach Rs 5,470 in Medium Term: Geojit Financial Services
Geojit Financial Services has issued a Buy recommendation for Hindustan Aeronautics Limited (HAL) with a target price of Rs 5,470. This recommendation comes amidst the company's robust performance and growth prospects in the aerospace and defense sectors. Below is an in-depth analysis of HAL's financials, operations, and technical outlook.
Overview
HAL, a Maharatna PSU, is a key player in India's aerospace and defense sector. The company's diversified operations include manufacturing aircraft, helicopters, and aero-engines, along with repair and overhaul services. Despite supply chain challenges, HAL has shown consistent growth, backed by a strong order book and government initiatives promoting indigenous defense manufacturing.
Financial Highlights
Revenue Growth Amid Challenges
- **H1FY25 Revenue:** Increased by 8% YoY to **Rs 10,324 crore**, driven by strong execution in manufacturing and the Repair & Overhaul (RoH) segment. - **EBITDA Margin:** Improved to **27% in Q2FY25**, reflecting a favorable revenue mix leaning towards RoH.
Profitability on the Rise
- **PAT Growth:** Surged by 43% YoY in H1FY25 to **Rs 2,926 crore**, attributed to better operational efficiency. - **Order Book:** Stands at approximately **Rs 1.2 lakh crore**, providing visibility for sustained revenue growth through FY27.
Long-Term Growth Projections
Revenue, EBITDA, and PAT are expected to grow at a CAGR of **15%, 14%, and 13%**, respectively, over FY24–FY26, supported by: - Normalization of supply chain issues. - Execution of the existing order backlog. - A robust pipeline of new orders.
Valuation Metrics
The table below summarizes key valuation metrics for HAL:
| Metric | FY24A | FY25E | FY26E |
|---|---|---|---|
| P/E Ratio (x) | 39.6 | 40.8 | 33.8 |
| Price/Book Value | 8.9 | 8.9 | 7.6 |
| EV/EBITDA | 21.6 | 30.4 | 25.2 |
HAL's stock currently trades at a 1-year forward P/E of 38.7x, reflecting a strong return profile of 29% for FY24.
Technical Analysis
Key Technical Indicators
- The stock recently found support near its **200-day EMA** after a market correction. - **Daily RSI:** Positioned at 60, breaking above its horizontal trendline. - **Weekly and Monthly Charts:** Show strong support levels around **Rs 3,900–4,000**, indicating a potential upward breakout.
Target Levels and Recommendations
The following table provides target levels and actionable recommendations for HAL:
| Metric | Value |
|---|---|
| Current Price | Rs 4,505 |
| Buy Range | Rs 4,400–Rs 4,540 |
| Target Price | Rs 5,470 |
| Stop Loss | Rs 4,080 |
| Potential Upside | +21% over 3–6 months |
Strategic Advantages
Government Push for Indigenous Defense Manufacturing
HAL is poised to benefit significantly from the Indian government’s focus on domestic defense production. With proven execution capabilities and a strong order pipeline, the company is well-positioned for long-term growth.
Strength in Repair and Overhaul Services
The RoH segment's steady growth ensures high margins and repeat business, contributing significantly to the company’s overall profitability.
Challenges and Risks
Supply Chain Issues: Delays in engine deliveries from GE for the Tejas MkIA fighter aircraft remain a concern.
High Valuation Multiples: Despite robust growth prospects, HAL's high valuation may pose risks for short-term investors.
Conclusion
Hindustan Aeronautics Limited continues to strengthen its position as a leader in India's defense sector. With a robust order book, strong financial performance, and supportive government policies, HAL is a compelling investment for long-term growth. Geojit's Buy recommendation reflects confidence in the company’s ability to deliver consistent returns.
