Hindustan Aeronautics share price jumps 5% as cabinet approves aero-engines procurement worth ₹26,000 crore

Hindustan Aeronautics Ltd (HAL) share price opened over 5% higher on Tuesday after the union cabinet committee approved procurement of 240 aero-engines for Su-30 MKI aircraft worth ₹26,000 crore from the company. HAL shares jumped as much as 5.09% to ₹4,925.00 apiece at the open on the BSE.

The Cabinet Committee on Security, on September 02, 2024, approved the proposal for procurement of 240 aero-engines (AL-31FP) for Su-30 MKI aircraft of the Indian Air Force (IAF) under Buy (Indian) category from Hindustan Aeronautics at a cost of over ₹26,000 crore.

According to the Defence Ministry statement, the delivery of these aero-engines would start after one year and complete over a period of eight years.

The engines will have indigenous content over 54%, enhanced due to indigenisation of some key components of aero-engines, and would be manufactured at the Koraput division of HAL.

“Su-30 MKI is one of the most powerful and strategically-significant fleet of IAF. The supply of these aero-engines by HAL would meet the fleet sustenance requirement of IAF to continue their unhindered operations and strengthen the defence preparedness of the country,” the Ministry of Defence said.

According to Antique Stock Broking, the new order will further bolster Hindustan Aeronautics’ already strong order backlog of ₹940 billion (FY24 end) to ₹1.2 trillion, leading to strong revenue visibility of 3.8x its TTM revenue.

“Further, HAL’s strong order pipeline from the medium to long term perspective will help the company build strong revenue visibility. Although near term financials may seem a bit volatile on account of supply chain challenges it has been facing to execute the large Tejas MK I A orders, given the multi-year double-digit earnings growth potential and robust return ratio profile of +20%, we believe that the stock is attractively valued,” Antique Stock Broking said.

The brokerage firm retained its ‘Buy’ rating on HAL shares with a target price of ₹6,145 apiece, valuing the company at a PE of 45x 1HFY27E earnings.

HAL share price

HAL share price has delivered multibagger returns of over 137% in the past one year and 580% in three years. The PSU defence stock is up more than 67% year-to-date (YTD).

At 9:20 am, HAL share price were trading 3.16% higher at ₹4,834.00 apiece on the BSE. 

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