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HAL has a healthy order book at Rs 84,800 crore, which is nearly 3.2 times its trailing 12-month revenues.
ICICIDirect said the biggest certainty to its HAL valuation is the orderbook, which is expected to cross Rs 1,00,000 crore by FY23, adding that there are hardly any defence primes in the world which manufacture combat aircraft and have an equivalent book-to-bill ratio.
Among key triggers for the stock, ICICIdirect said, includes continuous order inflow in maintenance, repair and overhaul (MRO) with a strong order pipeline of Rs 1.2 lakh crore in manufacturing in next three to four years. It noted that LCA Tejas MK1A deliveries to IAF, the largest order in manufacturing, is expected from FY25E. “Moreover, execution of other key orders and sustained growth in MRO will drive revenue growth in double digits from FY25E,” it said.
The domestic brokerage expects HAL to deliver revenue and Ebitda CAGR of 7.7 per cent and 14.1 per cent, respectively, in FY22-24E. PAT is seen growing at 10 per cent CAGR (FY21-24E).
Elara Securities expects HAL to see order inflows of Rs 58,000 crore, the highest-ever to date, in FY23. This, it said would include Rs 45,000 crore toward platforms & engines and Rs 13,000 crore on repair and overhaul (ROH) and accessories in FY23.
It said India’s defence goods positioning in the global market looks promising amid the recent geopolitical concerns.
“Order for 18 (+18 under provision) LCA Tejas for Royal Malaysian Air Force (RMAF) is in advanced stage of finalisation. In August, HAL announced it would be setting up a new office at Kuala Lampur, Malaysia, to leverage business opportunities in Malaysia and other South Asian countries. The Philippines, Argentina and Egypt also have shown interest in the new platforms as well as ROH for their existing fleet. HAL has been promoting advanced light helicopter (ALH) and light combat helicopter (LCH) platforms in the Philippines, Nepal, and Bangladesh, while also pushing them in Namibia, Mauritius, Vietnam, Thailand, and Nigeria,” it said.
Besides, HAL is pushing the Dornier-228, the HTT-40 and the trainer-cum-fighter aircraft in Nepal, Bangladesh, and Philippines.
PhillipCapital in a note said the company has been focusing on indigenisation of components, systems, and accessories in order to create an efficient manufacturing ecosystem in India.
“In FY22, these efforts resulted in cost savings of Rs 160 crore (versus Rs 130 crore in FY21). Besides, its efforts in vendor development are bearing fruition, with MSE procurement totalling Rs 3,200 crore in the last five years. Moreover, HAL also issued EoI for more than 800 items for indigenisation for Make-II procedure in FY22, which is a significant step. It is embarking upon a digital journey via initiatives like Project Parivartan, IoT integration and e-Procurement system,” it said, adding that HAL has benefited from a favorable sales mix as share of manufacturing.
The brokerage, however, does not rate HAL. ICICIDirect finds the stock worth Rs 2,665. Elara Securities sees the stock at Rs 2,650. Last month, Morgan Stanley initiated coverage on the stock with an overweight stance and a target of Rs 2,570.
The targets suggest up to 15 per cent upside for the stock.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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