HAL gets ‘overweight’ rating from Morgan Stanley, stock jumps 60% in 6 months

Morgan Stanley has put an ‘overweight’ tag on Hindustan Aeronautics Ltd (HAL) after the company cinched a Rs 5,250-crore contract from the defence ministry. The international brokerage has set the target price at Rs 3,129 per share, indicating a 0.8 percent downside from the last closing price of Rs 3,155.

The contract is for the procurement, manufacture and supply of aero-engines for MiG-29 aircraft. These engines, to be produced by HAL’s Koraput division, are crucial for the Indian Air Force (IAF) to maintain its MIG-29 fleet’s operational capability. The contract also supports the government’s ‘Make in India’ initiative.

On January 5, foreign broking firm UBS initiated coverage on the stock at Rs 3,600. “We expect the depletion of India’s military aircraft strength in the coming few years, geopolitics and a need for greater aircraft availability to accelerate ordering and lead to a manufacturing ramp-up at HAL versus the past decade,” UBS said in a report.

HAL’s order book stood at Rs 80,000 crore in FY23 and UBS expects it to triple to Rs 2.4 lakh crore in FY26, on the back of increased defence expenditure. In the Budget 23-24, defence got an outlay of Rs 5.94 lakh crore, a jump of 13 percent over the previous year.

On February 9, PTC Industries signed a memorandum of understanding with Hindustan Aeronautics to jointly work on raw materials, components and spares for aircraft and helicopters, in a push for self-reliance.

Over the past six months, shares of HAL have surged around 60 percent. In comparison, the benchmark index Nifty 50 has risen around 14 percent during the same time period.

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