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Why Hindustan Aeronautics Share Price is Rising

Nov 29, 2023

Why Hindustan Aeronautics Share Price is Rising

The year 2023 has been quite uncertain for the stock market.

We have seen tensions between China and Taiwan, the Israel-Hamas conflict, and the Russia-Ukraine war.

Amid these uncertainties, there's a silver lining in the form of increased global awareness related to defence. It gains attention because countries often prioritise their defence capabilities during geopolitical upheavals.

In India, the Atma Nirbhar Bharat initiative, which focuses on self-reliance, is doing wonders in defence.

One company taking the lead in this initiative is Hindustan Aeronautics Limited (HAL) because it is the largest manufacturer of aircrafts, helicopters, and unmanned aerial vehicles (UAVs) in India.

HAL shares have seen a massive buying interest.

In a week, the stock has gone up by over 7%, and in the last one month, it has seen an increase of over 25%.

So, why is the share price of HAL on the rise?

#1 New Orders

The defence acquisitions council is set to meet on 30 November 2023, where they are likely to give a green signal for three projects. One of them is about buying 97 units of Tejas Mark-1A fighter jets.

Moreover, the Indian air force is also planning to replace the currently used Russian Aircraft Corporation's Mikoyan and Gurevich (MiG) fighter jets with Tejas Mark 1-A fighter jets by 2025.

All of this is expected to drive revenue and profit growth for HAL and hence the buying interest.

#2 Steady Q2 Results

In the September 2023 quarter, the company reported a slight 1.2% increase in consolidated net profit to Rs 12.3 bn from Rs 12.2 bn during the same period last year.

This tapered growth can be attributed to a 18% increase in expense, reaching Rs 45 bn, up from Rs 38 bn in the corresponding quarter last year.

The earnings before interest, tax, depreciation and amortisation (EBITDA), saw a 5.8% decline year on year (YoY), reaching Rs 15.3 bn in the quarter under review as compared to the same quarter last year.

On a positive note, the profit before tax (PBT) showed a significant 51% sequential increase compared to the preceding quarter, amounting to Rs 16.5 bn.

However, the YoY increase in PBT was only marginal.

Despite the steady results, the management's optimistic outlook is casting a positive light on the company's future.

They express confidence that, within the next three years, the company will enhance its capacity to produce up to 24 light combat aircraft every year, an increase from the current capacity of 8 light combat aircrafts every year.

This forward-looking perspective suggests a promising trajectory for the company's growth.

#3 Partnership with Airbus

On Thursday, 9 November 2023, Hindustan Aeronautics and the leading European aerospace company, Airbus, joined hands by signing a contract.

They are planning to create a maintenance, repair, and overhaul (MRO) facility for the A320 family of aircraft in New Delhi.

This is a big deal because this partnership will boost the Make in India initiative and will make India more self-reliant in repairing and maintaining aeroplanes.

HAL's plan is to make an MRO hub in New Delhi which offers one stop solution for commercial airlines.

The goal is to have the facility ready by November 2024.

What's Next?

The company's management has some exciting plans in the pipeline.

First, they are gearing up to create a new business division with a focus on boosting exports. This means they're expanding business to grab opportunities on a global stage.

As a continuation of their focus on expansion, the company is looking for partners from around the world and even opening up export offices in specific places.

Second, the company's focus for upgrading aircraft for defence customers is another ace up its sleeve.

This includes changes like giving planes a tech makeover which is called avionics upgrade and integrating new weapon systems.

This expertise is expected to be a key driver in the company's success story moving forward.

How HAL Share Price has Performed Recently

HAL share price has gained 7% in the last five days and more than 80% in the year 2023 so far.

The company touched its 52-week high of Rs 2,334 on 28 November 2023 and its 52-week low of Rs 1,150 on 1 February 2023.

Foreign Institutional Investors (FIIs) have increased their stake in HAL by 6% on a year on year (YoY) basis.

As of the September quarter in 2023, FII now account for 12.63% of the company's stake, a notable increase from the 6.85% stake they held during the same time last year.

On the other hand, Domestic Institutional Investors (DIIs) have decreased their stake by 5% YoY from 13.48% to 9.72%.

Check out the detailed shareholding pattern here.

About HAL

HAL is an important player in building India's defence infrastructure. It is the only Indian company to have specialisation in manufacturing and maintaining aircraft services.

To make the best out of the resources available, the company spends around 7% of its revenues into the research and development activity every year.

Additionally, as the company has focus on growth and expansion, they have signed memorandum of understanding (MOU) with several companies.

This includes -

  • An MOU with Israel Aerospace Industries to convert civil aircraft to multi-mission tanker.
  • MoU with Safran, a French company which manufactures aircraft engines to set up a development, sales and support of helicopter engines.

For more details about the company, you can have a look at the HAL fact sheet and quarterly results on our website.

You can also compare the company with its peers.

HAL vs Bharat Dynamics

HAL vs Paras Defence

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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