Hindustan Aeronautics Limited, HAL, as one of the leaders in the defence sector will benefit from the government’s keen interest to develop this sector, according to a few fund managers.
The stock that has appreciated by more than 66 percent over the last year is “still not very expensive”, said Vikas Khemani, founder of Carnelian Asset Management. Khemani added a disclaimer that they own the stock.
Khemani was speaking at a panel discussion held during Moneycontrol’s Diwali Party to usher in Samvat 2080.
Also watch: Moneycontrol's Diwali Party that had fun, patakas and investing insights
Kush Bohra, founder of Kushbora.com, too agreed that there is still a “lot of room” for appreciation, given its position in a fast-growing sector.
The company has broken a long-held myth that you can’t make money in public-sector companies, added Madhusudan Kela, founder of MK Ventures.
Khemani pointed out how the defence story in India has changed over the last five years under Prime Minister Narendra Modi. He then elaborated on how government support has helped build formidable defence companies in the US.
He said, “If you look at the US, a lot of the companies, such as Lockheed Martin, have become big with the support of government initiatives such as the G2G (government-to-government) agreements. For the first time, we are beginning to see such things happening in India.” In G2G agreements, the purchasing government gets guarantees from the selling company’s government on performance parameters.
Khemani added that all this points to the government's vision for the sector.
“The government’s vision is to export defence-related equipment and HAL is a leader in that space,” he said, and added the stock is also “not very expensive”.
Khemani said, “We bought it when it had a dividend yield of 5-6 percent. So, you have a fast-growing sector, with the dividend yield and which the government is pushing. What else can you expect (for the stock than appreciation) in a sector which is witnessing superior growth?”
He added that the stock will continue to do well for 10 years.
MK Ventures’ Kela added that this stock has broken the myth that you can’t make money in public-sector companies; meanwhile, the whole sector has appreciated 10x. He expanded on the need for a fund manager to be open-minded.
“Forget individual companies. The bigger point is that, at the end of the day, these are all cycles. If you look at a 15-year cycle, they would have actually lost money or they may not have made as much money as a lot of private companies. But, if you look at it differently, these companies (PSUs) have done exceptionally well point-to-point… that’s why our philosophy is always to be open-minded and always listen to what the market has to say and be open to responding to the reality.”
Vohra pointed out that the story in this stock started a couple of years back but people were sceptical thinking “kitna badhega”. “Now that it has run up so much, people are still asking 'aur kitna badhega'… I think there's still room to grow. The stock has gone into a bit of a consolidation mode, which is a good thing after a sharp run-up.”
Vohra added, “I think the entire sector still has a lot of steam and HAL, as the leader in the pack, has a lot of room for appreciation”.
(Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.)
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