Ministry of Defence’s Rs 22.3 trillion Acquisition Proposal Sparks Robust Demand for Leading Aerospace & Defence Stock, Surging to a 52-Week High on Mega Orders!

On Friday, Hindustan Aeronautics Ltd (HAL) witnessed a 4.9% surge in its shares, reaching a new 52-week high of Rs 2,499 per share, up from the previous closing at Rs 2,382.3. The day concluded with the company’s shares trading at Rs 2,462.15 each, reflecting a 3.35% increase, accompanied by a notable 2.32 times surge in trading volume on BSE.

The Indian Defence Acquisition Council (DAC) has granted approval for critical capital acquisition proposals amounting to a staggering Rs 22,30,00,00,00,000, marking a significant stride towards achieving self-reliance in the defense sector. Noteworthy is that 98% of these acquisitions, totaling Rs 22,00,00,00,00,000, will be sourced domestically, thereby reinforcing the ‘Aatmanirbharta’ initiative.

Key highlights of the plan include:

Army

1. Acquisition of two types of Area Denial Munitions (ADM) for neutralizing enemy tanks and personnel.

2. Replacement of outdated Indian Field Guns with state-of-the-art Towed Gun Systems (TGS).

3. Introduction of 155 mm Nubless Projectiles to enhance the lethality and safety of artillery fire.

4. Implementation of Automatic Target Tracker and Digital Basaltic Computer for T-90 Tanks to maintain the combat edge.

Navy

1. Equipping Indian Naval Ships with Medium Range Anti-Ship Missiles (MRAShM) as a new offensive weapon.

Air Force

1. Procurement of Light Combat Helicopter (LCH) and Light Combat Aircraft (LCA) Mk 1A from Hindustan Aeronautics Limited (HAL).

2. Indigenous upgrade of Su-30 MKI Aircraft by HAL.

Boosting Indigenous Capability

1. A significant amendment in the Defence Acquisition Procedure (DAP) 2020 mandates a minimum of 50% indigenous content in all procurement cases, excluding AMC/CMC cost.

2. Support for Start-ups and MSMEs, allowing their participation in procurement cases with AoN cost up to Rs 300 crore without financial parameter limitations, extendable on a case-by-case basis up to Rs 500 crore.

This comprehensive plan represents a significant leap towards achieving self-reliance in the Indian defense sector. The emphasis on domestic sourcing and increased indigenous content aims to strengthen the armed forces while fostering growth in the Indian defense industry, creating jobs and economic opportunities. The support for start-ups and MSMEs further lays the groundwork for innovation and technological advancement in the sector. This bold initiative positions India as a major player in the global defense arena.

Earlier, the company underwent a stock split on September 28, 2023, dividing each existing Rs 10 equity share into two Rs 5 equity shares. Additionally, a final dividend of Rs 15 per share was paid on August 24, 2023.

According to Quarterly Results, net sales increased by 9.54% to Rs 5,635.7 crore, and net profit rose by 1.1% to Rs 1,232.3 crore in Q2FY24 compared to Q2FY23. For FY23, net sales increased by 9.37% to Rs 26,927 crore, and net profit increased by 14.25% to Rs 5,828 crore compared to FY22. The company, with a market cap of Rs 1,64,663 crore, maintains a healthy dividend payout of 29.6%. The order book stands at Rs 81,784 crore, reflecting the receipt of fresh manufacturing contracts and continued budget allocation. The bank balance position has improved to Rs 20,306 crore.

The stock boasts a PE of 27.2x, an ROE of 27.2%, and an ROCE of 30.6%. It has witnessed an 80% surge in one year, 280% in two years, and an impressive 500% in three years. Investors are advised to monitor this multibagger Large-Cap stock.

Disclaimer: This article is for informational purposes only and not intended as investment advice.

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