PSU defence stock to buy now for an upside potential of 51%; Do you own it?

As per the source, the Aerospace and Defense sector in India is poised for significant growth, valued at USD 27.1 billion in 2024 and projected to reach USD 54.4 billion by 2033, reflecting a CAGR of 6.99%. This expansion is driven by increased defense budgets and a focus on indigenous manufacturing, addressing national security needs effectively.

Price Movement 

With a market capitalization of Rs 2.33 lakh share, the shares of Hindustan Aeronautics Ltd were trading at Rs 3,513.85 per share, increasing around 0.03 percent as compared to the previous closing price of Rs 3512.80 apiece.

Brokerage Recommendations

Morgan Stanley, one of the well-known brokerages globally, gave a ‘Buy’ call on the defence stock with a target price of Rs 5,297, indicating a potential upside of 51 percent from Monday’s closing price of Rs 3,513.85 per share.

Brokerage rationale

The brokerage noted strong order inflows for the company over the nine months ending December 2024. It highlighted an expected ₹1.65 lakh crore in additional orders for LCAs and LCHs, emphasizing substantial growth opportunities ahead.

Hindustan Aeronautics Ltd (HAL) posted a 14% YoY rise in net profit to ₹1,440 crore in Q3FY25, driven by strong aircraft demand from the defence ministry. Revenue from operations grew 15% YoY, reaching ₹6,957 crore, reflecting the company’s steady growth in the sector.

HAL’s Q3FY25 EBITDA rose 17.2% YoY to ₹1,681 crore, with the EBITDA margin expanding by 50 bps to 24.2%. The board announced a ₹25 per share interim dividend for FY25, with a record date set for February 18, 2025.

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Order Book

HAL’s order book is expected to rise to ₹1.25 lakh crore by FY25. As of March 31, 2024, the company’s order book stood in excess of ₹94,000 crore, with additional major orders expected during FY25.

Future Projections

HAL expects revenue growth of 15-18% from FY25 to FY28, supported by ongoing projects and advancements in both military and civilian aerospace sectors. The company is actively addressing production delays attributed to technical challenges and remains committed to fulfilling its delivery schedules, including plans to deliver 11 Tejas Mk1A aircraft by March 2025.

Company profile 

Hindustan Aeronautics Limited is an Indian firm that designs, develops, manufactures, repairs, overhauls, upgrades and services a variety of goods such as airplanes, helicopters, aero-engines, avionics, accessories, and aerospace structures.

Written by Abhishek Singh

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