HAL shares see 83% rally in the year as buyers’ interest in its defence aircraft rises

Shares of Hindustan Aeronautics Limited (HAL) surged over 5% on Thursday, August 11 ahead of the company reporting its fiscal year earnings report for the April-June quarter on Friday, August 12.

₹1 lakh invested in HAL at the beginning of 2022 is now worth ₹1.75 lakh. 

HAL is one of the world’s largest and oldest defence manufacturing companies, and its investors have gotten very rich this year. HAL’s rise could also benefit two other defence manufacturers, say analysts. The company’s large order book and interest in the Tejas LCA by six countries have driven the rally in its stock.

Defence indigenization has been one of the goals of the current Indian government, to reduce dependence on foreign countries. But a crucial aspect that gets relatively less airtime is defence exports – and it has made investors of Hindustan Aeronautics richer by 75% in 2022 alone. 

HAL is in talks with Egypt, Malaysia and Nigeria for defence exports that could amount to over $5.5 billion, with tenders for setting up manufacturing facilities for the Tejas Mk1A light combat aircraft, helicopters and maintenance of Malaysia’s Sukhoi fighter jets, among others. 

The company has achieved excellent performance in terms of turnover. 

The Indian government’s focus on increasing defence indigenization has also helped HAL in securing economies of scale, making its export offers more competitive. This, coupled with the high technical ratings of Tejas, has made it a key contender for bagging contracts from Egypt and Malaysia. 

According to the company’s latest financials, HAL’s current order book stands at ₹82,000 crore – this is 3.3-times the company’s FY22 revenue. Further, it has a strong pipeline of ₹1.24 lakh crore of manufacturing orders over the next three to four years, which will help the company deliver double-digit revenue growth, according to a report by ICICI Direct Research. 

Once rejected by the Indian Navy as “too heavy”, Tejas has been one of the success stories of India’s defence indigenization efforts. And now, according to the government, six countries are interested in HAL’s light combat aircraft. 

Shares of HAL were trading at 2,273 rupees, 5.03% higher than the previous close on BSE.

The Indian government said that the US, Australia and Indonesia have also expressed interest in the Tejas. HAL has already offered the twin-seater variant of the Tejas LCA to Malaysia in a deal worth $1.5 billion, in addition to maintenance of the Russian-origin Sukhoi 30 fighter jets.  

The company’s last financial year earnings report notified that the current order book stands at Rs 82,000 crore. The defence company also expects to clock 6-7% revenue growth for FY23.