HAL shares hit all-time high after impressive Q4 earnings and UBS price target upgrade

HAL stock more than doubled in the last six months, rising 120 percent

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Hindustan Aeronautics Limited (HAL) shares hit a new all-time high of Rs 4,656.4, jumping as much as 10 percent at close on May 16, following the company’s strong Q4 results. The stock marked its fifth consecutive day of gains.

The optimism was also fueled by global brokerage firm UBS, which maintained a 'buy' rating on the stock and raised the target price to Rs 5,200 per share from Rs 3,600 ahead of the results release.

HAL stock more than doubled in the last six months, rising 120 percent, significantly outperforming the Nifty 50, which has gained over 13 percent.

Strong January-March Quarter Results

On May 16, the state-owned defense PSU reported a net profit of Rs 4,309 crore for the fiscal fourth quarter, up 52 percent from Rs 2,831 crore in the corresponding quarter of the previous year. Net sales for the quarter were at Rs 14,769 crore, up 18 percent from Rs 12,495 crore in the corresponding quarter last year.

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EBITDA margin expanded to 40 percent, from 26 percent in the corresponding quarter of the previous year. EBITDA for the quarter nearly doubled, growing by 81.8 percent from last year to Rs 5,901.1 crore. EBITDA is Earnings Before Interest, Tax, Depreciation, and Amortisation.

UBS Says 'Buy', Raises Target Price

UBS analysts highlighted the rationale behind the target upgrade on HAL, citing an earnings upgrade. "We believe this is justified by HAL's better order book scale-up, lower competition, and greater optionality in exports," they noted.

Over the next six months, HAL is well-positioned to deliver 8-10 trainer and fighter versions of the LCA-MK1A (Tejas) in FY25E, boosting manufacturing revenue. Following this, the order for 12 new SU-30 MKI aircraft, 156 LCH Prachand (combat helicopters), and 240 AL 31FP engines for the SU-30 is expected to be delivered by FY25E.

Of the $60 billion in new orders for HAL, UBS analysts believe that almost 20-25 percent could be awarded before FY26E, given the current speed of government procurement, a stronger domestic supply chain, and capacity build-up. They projected a three-fold increase in HAL's order book and a 25 percent revenue growth in manufacturing topline in FY23-27E.

Moreover, UBS analysts foresee a 'goldilocks scenario' for HAL over the course of this decade. Factors such as the government's emphasis on defense manufacturing, timely expansion of capacities to drive greater outsourcing to the private sector, and increased confidence in large indigenously designed and manufactured platforms will propel HAL forward, the analysts noted.

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