Multibagger Defence Stock Declares Dividend and Split: Blue Skies Ahead

Defence stocks in India have garnered significant interest for quite some time now.

There's a transformative shift underway in Indian defence from import dependency to global competitiveness. This is fueled by a government policy framework.

In a groundbreaking milestone, the Indian defence sector has reached new heights in FY23. It surpassed a significant milestone of Rs 1 trillion in the total value of defence production. This achievement represents an impressive year-on-year increase of 12%.

This surge in production has translated into a substantial spike in revenues.

One defence company has chosen to distribute profits through dividends and stock splits.

The company in question is none other than Hindustan Aeronautics (HAL).

Here's all you need to know.

• Hindustan Aeronautics announced a stock split on 28 June 2023.
• The company will issue stocks split in a ratio of 1:2. This means a sub-division of one equity share of the company, having a face value of Rs 10 each into two equity shares having a face value of Rs 5 each.
• The record date for the same is 29 September 2023.
• Apart from the stock split, the company will also pay a final dividend of Rs 15 to investors for the financial year 2022-23.

HAL has paid two interim dividends of Rs 20 each for the financial year 2023, making it among the top defence stocks which pay good dividends.

Interestingly, this is the first time the company has come out with a stock split.

A stock split is usually done to increase the liquidity of the stock in the market. Investors who are holding the stock till the record date will receive the new shares in demat accounts and the stock price will be adjusted according to the split ratio.

Road ahead

Despite challenges in production, HAL has continued to enjoy strong support from the Indian government.

The company has been entrusted with the supply of 83 Tejas Mark-1A jets to the Indian Air Force, followed by over Tejas Mk-2 jets and the advanced medium combat aircraft (AMCA). HAL is also set to manufacture twin-engine deck-based fighters for the Navy.

HAL is actively involved in manufacturing the Indian Multi-Role Helicopter (IMRH), a versatile medium-lift helicopter aimed at replacing the aging Mi-17 fleet. To support this endeavour, the company has partnered with Safran, a French company, for joint engine development.

HAL has also shifted its focus towards co-development and co-designing of technology to retain intellectual property rights within the country. The aim is to introduce advanced technology to India and ensure future upgradability.

In pursuit of this objective, HAL is seeking collaborations with foreign Original Equipment Manufacturers (OEMs).

Additionally, the production of GE-414 engines to power the Tejas Mk 2 aircraft with General Electric (GE) will be an added benefit.

Despite the hurdles faced, HAL's ongoing projects and partnerships position it as a key player in India's defence manufacturing landscape, poised to contribute to India's aim of Atmanirbhar Bharat.

Giant Leap

HAL's journey signifies a remarkable leap forward.

The "Make in India" initiative has provided HAL with increased revenue visibility, enabling the company to take previously avoided capital risks.

With a substantial order backlog of Rs 81,7.8 bn and a robust order inflow expected, HAL's order funnel is promising, making it a standout among defence stocks.

The company is aggressively pursuing exports by leveraging its range of indigenous products, particularly highlighting the capabilities and safety of platforms like LCA Tejas.

HAL has also secured the largest proposal approval of the total outlay of Rs 705 bn. The proposal is for the construction of 60 utility helicopters-marine, with an estimated cost of Rs 320 bn.

Further, what makes HAL interesting to track is its exposure to the drone market. The company is currently developing an artificial intelligence (AI)-driven advanced drone for strategic missions in high-altitude areas, including along the frontiers with China.

Its vast expertise, developed over several decades, positions HAL as a leader with multiple platforms, engines, and avionics. The company's unwavering determination and the immense potential of the industry ensure that HAL's journey will continue to be a remarkable giant leap forward.

How HAL shares have performed recently

Shares of HAL have surged over 22% in the past month. Over the year, the stock has delivered a multibagger return of 105%.

HAL shares touched a 52-week high of Rs 3,950 on 19 June 2023 and a 52 -week low of Rs 1,720.1 on 13 July 2023.

About HAL

Hindustan Aeronautics Ltd (HAL) is an aerospace and defense company, owned by the government of India.

Established on 23 December 1940, HAL is one of the oldest and largest aerospace and defence manufacturers in the world.

The company develops, designs, manufactures, and supplies aircraft, helicopters, avionics, and communications equipment for military and civil markets.

The company is a dominant supplier of aircrafts, helicopters, engines, avionics, and accessories as well as the main provider of maintenance, repair, and overhaul services to the Indian defence forces.

Over the years, the company has invested heavily in research & development (R&D) to trigger growth.

For more details, see the Hindustan Aero. company fact sheet and quarterly results.

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