Shares of Hindustan Aeronautics Ltd (HAL) tanked nearly six percent on March 23 after the announcement that the government is planning to sell up to 3.5 percent stake in the defence company through an offer for sale (OFS).
The stake sale would be valued at Rs 2,867 crore, and the government has set a floor price of Rs 2,450 apiece, which is at a 6.6 percent discount from the previous close.
At 9:17 am, shares of HAL were trading 5.5 percent lower at Rs 2,480 on the BSE.
This development would increase the free float of stock, believes Morgan Stanley which has an ‘overweight’ rating on the defence PSU’s stock with a target price of Rs 3,216.
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Even as the size is less than market expectations of around 5 percent, it removes an overhang on the stock, the brokerage firm highlighted.
Morgan Stanley remains overweight on HAL's stock and said it would look to use any weakness to add to positions.
At OFS floor Price, the stock is valued at a Price to Earnings (P/E) ratio of 17.4 times and 15.4 times EPS estimate for FY24 and FY25.
HAL, the largest defence PSU in India, is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.
The company has a healthy order book position of Rs 84,000 crore which is 3.2 times the Trailing Twelve Month revenues, driven by large-scale orders in manufacturing aircraft and helicopters.
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