Multibagger Stock: Public sector defence company – Hindustan Aeronautics Limited (HAL) share price has jumped almost 112 per cent in 2022 so far. The stock on Monday hit a record high of Rs 2,639 apiece and closed over 7 per cent higher to Rs 2613.05 per share on the BSE.
Insurance behemoth Life Insurance Corporation of India (LIC), which is also a domestic institutional investor (DII), held 2,58,00,466 equity shares or 7.72 per cent stakes in HAL, according to the June shareholding pattern of the company available on the BSE.
The surge in the counter is mainly on a strong outlook amid healthy order visibility. HAL has a large order book of Rs 84,800 crore, boosted by the recently awarded Rs 48,000 crore order to make 83 light combat aircrafts (Tejas), as per the domestic brokerage Antique Stock Broking.
The company also stands to meaningfully benefit from Rs 4.5 trillion orders over the next decade, the brokerage said.
“India is in the midst of modernizing its armed forces due to obsolescence and the geopolitical situation, and this should accelerate the procurement process of domestic defense products. And, HAL has demonstrated capability to develop military aircrafts and helicopters, in addition to those manufactured under license from foreign OEMs, along with developing their respective engines and accessories,” Antique Broking said in its report.
HAL posted healthy earnings growth of 16 and 22 pr cent during FY21 and FY22, respectively, and growth will start picking up again from FY24, with a sharp uptick in FY25 (EPS growth of 26 per cent) as the execution of Tejas LCA gathers momentum, the brokerage said.
Antique Broking believes that the company’s stock will re-rate meaningfully due to a strong order backlog with stable margins, and an unprecedented order pipeline.
Given the multi-year double-digit earnings growth potential and robust return ratio profile of over 20 per cent, the brokerage believes that the stock at 19x its FY24 EPS is attractively valued. Recommends Buy for a target of Rs 3,140 per share.