HIGHLIGHTS
LAKEWATER SHARED REPORT ON : NOVEMBER 27, 2023 | CMP : ₹2,287
CMP AS ON 10TH JUNE, 2024 : ₹4,807
Absolute Return for this Period : 110%
Hindustan Aeronautics Limited (HAL) is a top aerospace company in Asia. It designs, manufactures, and maintains aircraft, engines, and avionics. In recent years, defense stocks have become an attractive investment for Indian investors. The focus on modernizing defense, increased government spending, and the “Make in India” initiative have made these stocks popular.
HAL closed at around ₹4,807 on 10.06.2024 already registering 110% in half a year.
The following points delve deeper into why HAL returned handsomely:
- The Defence Procurement Board approved a plan to buy 26 Rafale fighters and Scorpene submarines for the Indian Navy. It will include full technology transfer for helicopter engines, acquiring fighter jets for the Indian Navy, and possibly extending the Scorpene submarine manufacturing line in India.
- A key highlight is the announcement of 100% technology transfer for the Shakti engine, which powers India’s advanced light helicopters (ALH).
- The CFO of HAL stated that they achieved double-digit growth in FY24 at 13% and aims to reach double-digit growth again in FY25. With a strong order book, upcoming orders, and a focus on indigenization programs, HAL can maintain and continue growing at a double-digit rate.
- In the last two to three years, HAL has started focusing on the export market. Previously, their focus was solely on meeting the needs of domestic defense customers. Now, with many indigenously designed and developed products, HAL is optimistic about increasing exports.
- HAL is targeting exports to countries like Argentina, Nigeria, Egypt, and the Philippines, which are interested in the Light Combat Aircraft (LCA) Mk-1A and the Advanced Light Helicopter (ALH).
- HAL is diversifying its products and services through initiatives such as:
– Civil MRO
– Converting passenger aircraft to freight
– UAVs
– Simulators
– Joint ventures, like the one with Safran for helicopter engines and with IAI for
converting civil passenger aircraft to multi-mission tanker aircraft.
- The production capacity for the LCA Mark 1A was originally set at 16 per year but is now being increased to 24 with the opening of a third line in Nashik.
- The Tejas fixed-wing aircraft program is well underway. The capacity for producing the Tejas can be further increased from 24 to 30 with additional incremental investment if needed.
HAL is underway its capacity expansion which is visible with a recent interview of its CFO, where he mentions that he anticipates an order book of 3,00,000 crores in next 3 years.
HAL will try to retain a 13% growth sustainably every year with continuous improvements and better reward for its investors.
