Hindustan Aeronautics' stock appears to be defying gravity as more brokerages jump on the bandwagon to upgrade the company following exceptional Q4 results. This is true even if the stock has increased by more than 22% over the last week and more than 200% over the previous year.
The stock reached a new record high of Rs 4,870 and was trading at Rs 4,831 on the NSE at 09.42 am.
To put things in perspective, Hindustan Aeronautics' stock had already increased by 22.5 percent over the previous five days. Attracted by the company's great profits performance, huge order book, and good growth outlook, investors poured in behind the counter.
The state-owned military PSU reported a 52 percent year-over-year increase in net profit of Rs 4,309 crore for the March quarter of FY24, amid the increasing buzz surrounding the scrip. Additionally, net sales increased by 18% to Rs 14,769 crore.
Fulfilling the third essential criterion, HAL's EBITDA margin surged to 40% in Q4, a substantial increase from the 26% recorded in the same quarter of the previous fiscal year.
Brokerages on Wall Street were not only delighted with the company's impressive quarterly performance, but several raised their target prices for the stock, creating more room for upside.
International stockbroker UBS increased its target price for Hindustan Aeronautics before the company's Q4 earnings were disclosed. Expecting an increase of more than 10% from present levels, the brokerage increased its target price by more than 44% to Rs 5,200 while keeping its 'buy' call on the counter.
UBS analysts ascribed the price hike to the company's improved profitability. "We believe this is justified by HAL's better order book scale up, lower competition and greater optionality in exports," they stated.
A 'goldilocks situation' was also projected by UBS for HAL during the next ten years. The company cited a number of reasons as the cornerstones of HAL's successful future, including the government's prioritization of defense manufacturing, the prompt expansion of capacities to enable increased outsourcing to the private sector, and the growing confidence in large domestically designed and manufactured platforms.
Following suit, Jefferies increased its price objective for the company by about 47% to Rs 5,725 per share while keeping its "buy" recommendation. HAL is 'flying high,' according to the brokerage, and visibility is good.
According to Jefferies, HAL will also produce better margin service income, and throughout the next four to six years, aircraft deliveries are probably going to witness double-digit revenue growth. Furthermore, as it concentrates on cost optimization, the firm is anticipated to preserve its present margin.Additionally, export visibility is rising, according to Jefferies.
Nomura was another firm that raised its price objective for HAL. The company kept its 'buy' recommendation on the stock but raised its price objective for it by more than 7% to Rs 5,100.
Nomura expressed optimism about HAL, citing the company's strong order backlog (approximately Rs. 94,000 crore) and robust pipeline (approximately Rs. 390,000 crore over the next eight years) supported by the fleet management of the Indian Air Force and the prioritization of platform replacements and legacy fleet, all of which should provide long-term growth visibility.
Elara Capital, which sees potential for HAL from indigenization as well as untapped exports in the aviation and helicopter industries, joined the list. The brokerage projected a 17% profits CAGR for FY24–26E and a 24% return on equity for HAL.
In addition to increasing its price objective for the company by 36% to Rs 5,590, Elara Capital also upgraded the firm's rating to 'buy'.
Based on the recent wave of target price increases granted to HAL, it is reasonable to conclude that the company's journey is far from finished and that investors hoping to profit can still jump on board.
