Hindustan Aeronautics shares hit an all-time high of ₹3,428.75 on the BSE on Monday defying broader market pressure. The stock, however, closed at ₹3,371.05 — up 1.66 per cent over the previous day’s close of ₹3,316.15, surrendering part of the gains. The BSE Sensex slumped 616 points (0.83 per cent) and the BSE-500 edged down 232.21 points (0.72 per cent), indicating across-the-board selling.

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According to analysts, the Union government’s steadfast focus on make-in India for Defence sector and the strong performance by HAL boosted sentiment for the stock. “HAL stands as a cornerstone in India’s defence advancements, both domestically and in the international arena,” said Anirudh Garg, Partner and Fund Manager at INVAsset.

Export opportunity

Elara Securities believes rising share of indigenisation along with unexplored exports opportunity in the aircraft & helicopter industry warrant a rerating. “We expect an earnings CAGR of 14 per cent during FY23-26 with a ROE of 24 per cent during FY24-26”.

HAL reported a 7 per cent year-on-year increase in revenue to ₹6,060 crore in Q3 FY24, aligning with analysts’ estimates.

The Defence Acquisition Council approved the acquisition of 97 more Tejas Mk1A aircraft and 156 LCH Prachand helicopters and upgradation of 84 Su-30MKI aircraft indigenously by HAL, said another domestic brokerage Prabhudas Lilladher, adding that capital outlay on aircraft and aeroengines for defence forces in FY25 interim Budget grew 44 per cent to ₹40,800 crore (vs ₹28,200 crore in FY24BE). “These positive developments provide a boost to the company’s long-term revenue visibility,” it further said. However, it has downgraded the stock to Hold from Buy due to valuation.

Anirudh Garg commented, “Hindustan Aeronautics Limited emerges as a linchpin in India’s defence narrative with the recent approval for producing 34 ALH Dhruv helicopters, a move aimed at reinforcing self-reliance and modernising the nation’s defence infrastructure. Simultaneously, the government sanctioned a substantial investment of over $967,000 for the upgrade of the Indian Army’s BMP Infantry Fighting Vehicles. This dual commitment reflects India’s dedication to enhancing indigenous defence capabilities, with HAL playing a pivotal role in these transformative endeavours.”

Key risks

Key risks include lower spend in the defence capital budget, less domestic procurement allocation, increased competition from the private sector, and a significant rise in commodity prices, said Elara Securities, which sees little headroom for the stock due to its sharp run-up in the share price.

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Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd, said, “MACD (moving average convergence divergence) indicator is supportive of the counter’s current strength, indicating potential upward momentum. Additionally, the RSI (relative strength index) is positively poised. It has a psychological resistance level of ₹3,650. “It is suggested that both long- and short-term investors follow the buy-on-dip strategy, on HAL,” he said.