IGI Logo

* In a significant move to bolster India's defense capabilities, the Defence Acquisition Council recently gave the green light for the procurement of 12 SU-30MKI jets for the Indian Air Force (IAF), a deal long overdue to HAL. Further, collaboration with Fabrica Argentina de Avionics (FAdeA) for MRO and offset requirements in the LATAM region not only strengthens India's defense capabilities but also positions itself as a global player in the aerospace industry. Company continue to focus on export market opportunities to achieve sustainable export growth in coming years.

* Moreover, the Defence Ministry's approval of a substantial Rs 60,000 crore upgrade for India's Su-30MKI fleet, spearheaded by HAL and supported by DRDO, underscores a strategic effort to modernize and fortify the aircraft with advanced radars, mission control systems, and weaponry.

* As HAL explores new avenues for collaboration, such as the MoU with Fabrica Argentina de Avionics (FAdeA) for MRO and offset requirements in the LATAM region, and considers the development of armed variants of unmanned aerial vehicles (UAVs), it not only strengthens India's defense capabilities but also positions itself as a global player in the aerospace industry. HAL's engagement in discussions with multiple countries for the export of Tejas aircraft and ALH-Dhruv helicopters demonstrates India's commitment to fostering international partnerships while showcasing its advanced defense technologies on the global stage.

* In the last one quarter, HAL has signed a contract for RD-33 Aero Engines for the MiG-29 aircraft, aiming to sustain the operational capability of the Indian Air Force's MiG-29 fleet while increasing indigenous content in future repairs. Furthermore, HAL is in talks with various countries like Egypt and the Philippines, offering Tejas Mk1 with BrahMos-NG combo to the Philippines Air Force and proposing transfer of technology for local assembly of Tejas mk1A fighter jets to Egypt and the Philippines, along with discussions to offer ALH-Dhruv helicopters to the Philippines.

View and valuation: We have a positive outlook on HAL, as the company faces limited competition from the private sector due to the high capital intensity and long gestation periods for developing manufacturing capabilities in the sector supported by: 1) Strategic diversification into civilian sector, 2) Some big ticket future orders with new orders anticipated for LUH, LCH, Su-30, and HTT-40 in the near to medium term, 3) Strategically positioned itself as a sole supplier domestically. 4) Make collaboration with foreign giants (Safran, Airbus), 5) The company's massive order book stood appx. Rs.840bn which is ~3.1x of FY23 revenue, would support the growth story of the company. We ascribe “BUY” rating on the stock with a TP of Rs.3,878 (33x of FY26E EPS) increasing in the multiple is reflection of winning new order in near term like Tejas MK1A, Sukhoi-30MKI up-gradation, ALH Dhruv Helicopters and various aerospace structures for PSLV and GSLV etc and focus on export opportunity .

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131