HAL Shares Break All-Time High After UBS Target Price Upgrade and Impressive Q4 Earnings

by | May 17, 2024 | 0 comments

The state-owned defense PSU reported a net profit of Rs 4,309 crore for the fiscal fourth quarter, up by 52% from Rs 2,831 crore in the same quarter in the previous year as at the May 16.

On May 16 Hindustan Aeronautics Limited (HAL) shares scaled new peaks hitting an all-time high at Rs 4656.4 thereby closing higher by 10 percent. With its robust Q4 results, this rocketing was noted as fifth successive day of gain since.

HAL Shares Performance

All-Time High and Consistent Gains

Hindustan Aeronautics Limited (HAL) shares hit a record high of Rs4656.4 on May16th marking it’s above average performance during the forth quarter and favorable market sentiment.

UBS Upgrade Fuels Optimism

Investor confidence received an uplifted momentum following an increase in target price from RS3600 to RS5200 per share by global brokerage firm body UBS ,which still maintained its buy recommendation concerning HAL shares before quarterly results announcement.

Exceptional Stock Performance

In comparison to Nifty Fifty that increased by only about thirteen per cent over that period, this extraordinary growth saw the prices for HAL stock climb more than one hundred per cent within six months.

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Strong January-March Quarter Results

Impressive Net Profit Growth

Rs4309 crore was recorded as net income for FY20-21 Q4 which represented an increase of fifty two percent from INR2831Crs posted during prior corresponding period such a significant development portrays company’s enhanced profitability trends.

Robust Sales Increase

Net sales for the quarter were reported at Rs14,769 crore, rising by eighteen percent relative to Rs12,495 crore realized in the same quarter last year. This high sales growth reveals large demand for HAL’s products and services.

Significant EBITDA Margin Expansion

The EBITDA margin of HAL increased from 26 percent in the final quarter of FY20-21 to 40 percent in corresponding period a year ago. In Q4, EBITDA rose by 81.8% y/y to INR59.011Bn.EBITDA stands for earnings before interest, tax, depreciation and amortization and is a very important parameter related to operational efficiency of the company.

UBS Says ‘Buy’, Raises Target Price

Rationale Behind Target Upgrade

In their opinion “We believe this is justified by HAL’s better order book scale-up, lower competition, and greater optionality in exports.”

Anticipated Deliveries and Revenue Boost

Over next six months, HAL would be able to deliver around LCA-MK1A (TEJAS) fighter variants say around 8-10 per FY25E expected which would improve manufacturing revenues. Additionally, it was anticipated that over next financial years i.e. till FY22-23 orders for twelve new SU30 MKI aircrafts , one hundred fifty six LCH Prachand (combat helicopters) and two hundred forty AL31FP engines for SU30 could be executed.

Substantial New Orders Expected

According to UBS analysts almost 20-25% of $60bn worth of new orders for HAL could be decided before FY26E because government procurement process is faster now also aided with more resilient domestic supply chain and building up capacity.

Projected Order Book and Revenue Growth

The order book of HAL can triple and the manufacturing topline revenue can grow by 25% in FY23-27E, UBS estimates. These projections reveal the strong future prospects and growth potential of the company.

Long-Term Outlook for HAL

A ‘goldilocks scenario’ is anticipated for HAL by UBS analysts during this decade. The Government’s focus on defense manufacturing, timely capacity expansions, increased reliance on private sector outsourcing and rising confidence in large indigenous platforms are some of the factors expected to drive HAL forward.

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Conclusion

HAL’s significant Q4 earnings together with UBS price target upgrade have propelled its shares to a record high. Strong financial performance, huge increase in net profit and sales as well as optimistic view from UBS illustrate that the company has a solid position within the defence industry.

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