HAL
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| Current Price: ₹ 4190.2
Date: Oct 25, 2023, (Price: ₹ 1809.75)
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A Detail Equity Research Report - Hindustan Aeronautics Limited with the tagline Defining Indian Aerospace
A Detail Equity Research Report - Hindustan Aeronautics Limited with the tagline Defining Indian Aerospace
HINDUSTAN AERONAUTICS LIMITED
Recommendation: Buy
CMP: Rs. 1912/- TARGET: Rs. 3123/-
SENSEX: 65397/- NIFTY: 19542/-
KEY STOCK STATISTICS:
Market Capitalization (crs): 1,27,53/-
Book Value: Rs.364 /-
Face Value: Rs.5 /-
52 week High/Low: 3123/1150
P/E Ratio: 21.20
P/BV: 5.20
Dividend Yield: 0.72/-
Company Background:
➢ Hindustan Aeronautics is engaged in thebusiness of Manufacture of Aircraft andHelicopters and Repair, Maintenance ofAircraft and Helicopters.
➢ HAL plays a strategic role in India’s defenseprogram being the only Indian companyhaving specialization in aircraft manufacturing and providing itsMaintenance and related services.
➢ HAL has signed an MoU with Safran to setup a joint venture intended fordevelopment, production, sales and support of helicopter enginesMoU with the IAI, Israel AerospaceIndustries on 4 March 2022 to convert the civil passenger aircraft to multi-mission tanker aircraft.
SHAREHOLDING PATTERN(%):
Source: Company, KFO Research
Returns(%):
| |
3 Months |
6 Months |
12 Months |
| SENSEX |
-1.04 |
-10.42 |
2.8 |
| HAL |
20.6 |
43.47 |
105.27 |
Source: Company, KFO Research
INDUSTRY OUTLOOK:
After COVID-19, the Aerospace & Defence (A&D)industry is recovering in both Civil and Defence Sectors. The Defence Sector is expected to continueto grow in 2023-24, as due to global geopolitical conflicts many countries have significantly increased
Defence budgets to strengthen their military capabilities. In Civil Sector, the global passenger traffic has improved significantly in 2022 which is expected to reach 2019 levels by end of 2023 or early 2024. This has become a driving factor for large size manufacturing orders and aftersales activities in theindustry.
Indian Defence Sector which was so far contributingas strategic sector is gradually developing as an economic sector which is capable to contribute to the economic growth of the country. Under the Atmanirbhar Bharat initiative, Government is facilitating the development of the Indian industry to reduce the defence import as well as dependence on the foreign OEMs. Various initiatives of the GoI in recent days have given thrust on the indigenization and indigenous procurement of defence equipment.
Over next 5 -10 years such reforms will equally help Defence PSUs and private industry to put a firm step towards achieving a self-sustaining Defence industryin the country. As continuous efforts towards achieving self-reliance “Atmanirbharta” in the Aerospace & Defence industry in India, HAL will remain involved in supporting Startup Companies, SMEs/ MSMEs, Tier – II and III vendors. HAL will alsokeep handholding the vendors and suppliers in R&D, capability development and extended employmentgeneration.
Source: Company, KFO Research
OUTLOOK:
In the year 2023-24, revenues of Aerospace & Defence companies are expected to remain largely stable orgrow, as military programs continue to be critical tonationalsecurity for many countries, especiallyconsidering rises in geopolitical tensions globally. Global defense spending is expected to grow as major world powers are likely to continue to strengthen their militaries in response to geopolitical tensions. India has plans to develop civil aviation in the countr through regional connectivity for its tier-2 cities.
Government has launched UDAN Scheme for thepurpose. HAL is contributing to the UDAN initiative through its Hindustan-228 aircraft which is the first made in India civil aircraft used for commercial flight.
Source: Company, KFO Research
Growth Drivers:
✓ Multiple policy reforms in the country to promoteDefence manufacturing.
✓ Focus of Government to reduce Defence import bill.
✓ Gradually developing civil MRO opportunities in India.
✓ Development of new potential market in India such asfor regional jets, UAVs etc.
✓ Atmanirbhar Bharat Abhiyan of Govt. of India.
✓ Growth potentials through alliance and partnership forglobal markets.
✓ Launching Design and Development programs withinitial company funding for Indian Defence Services.
Diversify into civil market for both manufacturing andMRO opportunities.
✓ Enhance Indigenisation to ensure higher indigenouscontent in our products.
✓ Expand our operations globally through collaborations with global partners.
✓ Opening Export Offices in the target geographies to explore global market and export opportunities.
BUSINESS ANALYSIS AND HIGHLIGHTS:
PROS:
• Company is almost debt free.
• Company has delivered good profitgrowth of 23.9% CAGR over last 5 years
• Company has a good return on equity (ROE) track record: 3 Years ROE 26.7%
• Company has been maintaining ahealthy dividend payout of 29.6%
• Company's working capitalrequirements have reduced from 98.4.
CONS:
• The company has delivered a poor sales growth of 7.77% over past five years.
• Tax rate seems low
• Promoter holding has decreased over last 3 years: -18.3%.
VALUATIONS:
✓ On the basis of EPS Multiple Method, we arerecommending ‘Buy’ for the stock. Since the stock offers good opportunity, we initiate a ‘BUY’ signal on the stock with 12-month price target of Rs 3123/- share an upside of 63.34 % from current levels.
PEER COMPARISON :
| # |
Company |
CMP |
M Cap |
52W High |
52W Low |
PE |
PB |
ROCE Last Yr |
ROE Last Yr |
PAT TTM |
Div Yield |
| 1 |
Hindustan Aeronautics Ltd. |
1911.8 |
127853 |
3123.1 |
1150.5 |
21.2 |
5.4 |
30.6 |
27.2 |
6028 |
2 |
| 2 |
Bharat Dynamics Ltd. |
1002.6 |
18376 |
1278 |
786.8 |
51.9 |
5.8 |
15.7 |
11.4 |
354 |
0.9 |
| 3 |
Data Patterns (India) Ltd. |
2035.5 |
11357 |
2484 |
995 |
79.3 |
9.8 |
19.7 |
14.2 |
135 |
0.3 |
| 4 |
Astra Microwave Products Ltd. |
481 |
4579 |
513 |
213.3 |
74.9 |
6.5 |
17.1 |
11.4 |
57 |
0.7 |
| 5 |
Paras Defence And Space Technologies Ltd. |
739.4 |
2883 |
848 |
445.6 |
82.4 |
7.8 |
14.5 |
10.2 |
35 |
0 |
| 6 |
Rossell India Ltd. |
489.4 |
1837 |
549.8 |
221 |
75.1 |
6.4 |
10.1 |
10.4 |
24 |
0.2 |
| 7 |
Krishna Defence and Allied Industries Ltd. |
303.5 |
347 |
325 |
90.8 |
0 |
12.3 |
12.4 |
12.6 |
0 |
0
|
BALANCE SHEET (RS. IN CRS):
| #(Fig in Cr.) |
Mar-15 |
Mar-16 |
Mar-17 |
Mar-18 |
Mar-19 |
Mar-20 |
Mar-21 |
Mar-22 |
Mar-23 |
| Shareholder's Funds |
16804 |
11032 |
12559 |
9511 |
12082 |
13249 |
15424 |
19313 |
23572 |
| Minority's Interest |
0 |
0 |
0 |
0 |
4 |
4 |
4 |
4 |
4 |
| Borrowings |
107 |
0 |
0 |
100 |
100 |
0 |
0 |
0 |
0 |
| Other Non-Current Liabilities |
11899 |
12849 |
13401 |
11981 |
10075 |
8427 |
10871 |
13487 |
11675 |
| Total Current Liabilities |
35528 |
32650 |
25585 |
26097 |
28193 |
31127 |
25413 |
25023 |
30827 |
| Total Liabilities |
64339 |
56532 |
51545 |
47689 |
50454 |
52807 |
51712 |
57826 |
66078 |
| Fixed Assets |
7366 |
6549 |
7350 |
7566 |
7459 |
7357 |
7166 |
6766 |
6834 |
| Other Non-Current Assets |
2014 |
4257 |
4020 |
3108 |
3347 |
4056 |
4168 |
6068 |
7359 |
| Total Current Assets |
54959 |
45726 |
40176 |
37015 |
39648 |
41394 |
40378 |
44985 |
51877 |
| Total Assets |
64339 |
56532 |
51545 |
47689 |
50454 |
52807 |
51712 |
57826 |
66078 |
CASH FLOW STATEMENT (RS. IN CRS):
| #(Fig in Cr.) |
Mar-15 |
Mar-16 |
Mar-17 |
Mar-18 |
Mar-19 |
Mar-20 |
Mar-21 |
Mar-22 |
Mar-23 |
| Opening Cash & Cash Equivalents |
11238 |
1729 |
334 |
2804 |
107 |
27 |
279 |
7146 |
3070 |
| Cash Flow from Operating Activities |
-8882 |
3148 |
-405 |
-748 |
-7700 |
1527 |
15117 |
10173 |
8830 |
| Cash Flow from Investing Activities |
710 |
1347 |
3012 |
597 |
5294 |
-1339 |
-1180 |
-12785 |
-5728 |
| Cash Flow from Financing Activities |
-1274 |
-5880 |
-164 |
-2540 |
2326 |
64 |
-7070 |
-1464 |
-1731 |
| Net Cash Inflow / Outflow |
-9446 |
-1385 |
2443 |
-2691 |
-80 |
252 |
6867 |
-4076 |
1370 |
| Closing Cash & Cash Equivalent |
1792 |
344 |
2777 |
113 |
27 |
279 |
7146 |
3070 |
4441 |
PROFIT AND LOSS ACCOUNT (RS. IN CRS):
| #(Fig in Cr.) |
Mar-15 |
Mar-16 |
Mar-17 |
Mar-18 |
Mar-19 |
Mar-20 |
Mar-21 |
Mar-22 |
Mar-23 |
| Net Sales |
15939 |
16759 |
17950 |
18520 |
20008 |
21445 |
22882 |
24620 |
26927 |
| Other Income |
1649 |
1944 |
1042 |
762 |
376 |
297 |
357 |
985 |
1670 |
| Total Income |
17588 |
18703 |
18991 |
19282 |
20384 |
21742 |
23240 |
25605 |
28598 |
| Total Expenditure |
13555 |
14621 |
14687 |
15071 |
15457 |
16531 |
17538 |
19204 |
20242 |
| Operating Profit |
4033 |
4082 |
4304 |
4211 |
4927 |
5211 |
5701 |
6401 |
8356 |
| Interest |
21 |
6 |
16 |
35 |
178 |
360 |
267 |
65 |
64 |
| Depreciation |
822 |
863 |
713 |
947 |
1025 |
999 |
1158 |
1111 |
1785 |
| Exceptional Income / Expenses |
2 |
0 |
0 |
0 |
0 |
119 |
2 |
0 |
0 |
| Profit Before Tax |
3191 |
3213 |
3592 |
3243 |
3725 |
3979 |
4283 |
5225 |
6510 |
| Provision for Tax |
792 |
1209 |
967 |
1252 |
1396 |
1096 |
1038 |
145 |
682 |
| Profit After Tax |
2399 |
2004 |
2625 |
1990 |
2328 |
2883 |
3246 |
5080 |
5828 |
| Adjustments |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
| Profit After Adjustments |
2399 |
2004 |
2625 |
1990 |
2329 |
2883 |
3246 |
5080 |
5828 |
| Adjusted Earnings Per Share |
24.9 |
27.7 |
36.3 |
29.8 |
34.8 |
43.1 |
48.5 |
76 |
87.1 |
Source : www.sharescart.com
