Hindustan Aeronautics gains 1% as IAF eyes to procure 97 additional LCA aircrafts

Shares of Hindustan Aeronautics (HAL) gained 1.5 percent to Rs 1,945 per share on BSE on October 5 after the Indian Air Force (IAF) said that it would procure 97 more LCAs on delivering the first LCA Tejas twin-seater aircraft. The S&P BSE Sensex was up 326 points or 0.5 percent to
65,552 levels, as of 9:25 am.

So far this year, the stock of this defence major has skyrocketed 54 percent, as against 7 percent surge in the Sensex. Earlier, the stock had touched a 52-week high of Rs 2,090 apiece on September 11, 2023.

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In an exchange filing dated October 4, HAL management said that the company is committed to deliver all the twin seater aircraft pertaining to IOC and FOC contract to IAF in the current financial year.

“With this, we are moving one step closer towards achieving self-sufficiency on the fixed wing segment. These trainers also ensure smooth transition for the pilots from trainer to fighter aircraft in this class,” added C B Ananthakrishnan, CMD (Additional Charge), HAL.

The LCA Tejas Twin Seater is a light weight, all weather multi-role 4.5 generation aircraft. It is designed to support the training requirements of the IAF and augment itself to the role of a fighter in case of necessity.

The production of the LCA twin seater variant adds India to the list of very few elite countries who have created such a capability and have them operational in their defence forces.

READ MORE: Six reasons why HAL may continue to remain a darling for investors

Analysts at Prabhudas Lilladher initiated a ‘buy’ rating on the counter, sharing a target price of Rs 2,266 apiece.

“HAL is a play on the growing strength & modernization of India’s air defence given its position as the primary supplier of India’s military aircraft and long term sustainable demand opportunity, owing to the government’s push on procurement of indigenous defence aircraft. We estimate revenue/adjusted profit-after-tax (PAT) compounded annual growth rate (CAGR) of 11 percent/14.2 percent over FY23-26E,” the brokerage firm said.

Furthermore, they added that the company is likely to benefit from long-term demand opportunity as the defence ministry aims to sanction a slew of aircraft acquisitions over the next 10-15 years.

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