Motilal Oswal, a prominent brokerage firm, has recently launched coverage on Hindustan Aeronautics Limited (HAL), issuing a ‘Buy’ recommendation along with a target price of ₹5,100. This target suggests a potential upside of 27% from HAL’s current market price, which stands at approximately ₹4,031. As of 1:15 PM, HAL’s shares were trading 2.7% higher, reaching ₹4,139.70.
Strong Order Book Fuels Growth
HAL boasts an impressive order book valued at ₹1.8 lakh crore, ensuring revenue stability for the next few years. The company has significantly bolstered its order intake, with ₹1.2 lakh crore added in FY25 alone. According to Motilal Oswal, the manufacturing segment has likely reached its lowest point in FY24, and growth is anticipated moving forward, supported by a clear pipeline of projects.
- Future Market Potential: Motilal Oswal estimates an addressable market of ₹6 lakh crore for HAL over the next 3-4 years. This includes substantial projects like the Tejas Mk-1, Tejas Mk-II, AMCA, and the Twin Engine Deck Based Fighter (TEDBF), alongside existing orders.
Positive Industry Trends
The Indian Air Force (IAF) remains a key customer for HAL, actively modernizing its fleet, which bodes well for the company. In light of its strategic priorities for FY25-26, the IAF plans to enhance its capabilities by acquiring various assets, including:
- Combat aircraft
- Helicopters
- Radars
- Mid-air refuelers
These acquisitions align with India’s Aatmanirbhar Bharat initiative, promoting self-reliance and indigenous development, positioning HAL advantageously in this evolving landscape.
Motilal Oswal highlights that the IAF is also focusing on upgrading its Sukhoi 30 fighter jets, as well as acquiring advanced intelligence and jamming aircraft. This trend further reinforces the growth prospects for HAL.
Expansion into MRO Services
In addition to its core business, HAL is exploring opportunities in the Maintenance, Repair, and Overhaul (MRO) sector, particularly in civil aviation. The company has already initiated operations at its Nashik facility and is in talks with Airbus regarding MRO services for A320 aircraft.
Given the increasing fleet of aircraft in India, HAL is poised to benefit from a surge in demand for maintenance and MRO services, solidifying its position in the aviation sector.
Recent Stock Performance
Despite a 4.8% decline in HAL’s stock over the past five trading sessions, the company’s shares have rallied over 19% in the last month. However, they have seen a drop of 7% over the past six months. Looking at the last year, HAL has still managed to provide a 13% return to its investors.
In summary, with a robust order book, positive industry dynamics, and an ambitious expansion into MRO services, Hindustan Aeronautics is on a promising trajectory, making it a noteworthy investment opportunity.
