Target: ₹2,200
CMP: ₹1769.15
Hindustan Aeronautics (HAL) has delivered revenue, EBITDA and PAT CAGR of 7.4 per cent, 12 per cent and 26.5 per cent, respectively, in FY18-22. In FY22, repair and overhaul contributed about 64 per cent to total revenues, while manufacturing contributed about 30 per cent
HAL caters to a large spectrum of aerospace business, which includes design, development, manufacturing and maintenance, repair and overhaul (MRO) of different types of aircraft/helicopters and engines.
Healthy order-book position at ₹82,153 crore (about 3.3x FY22 revenues), of which manufacturing segment order backlog is at ₹61,564 crore (75 per cent of total OB) led by large-scale orders of LCA, LCH and ALH). Strong pipeline of ₹1.24 lakh crore worth of orders in manufacturing for the next three-four years led by LUH, LCH and engines for Su-30 and MiG-29. LCA Tejas MK1A deliveries to IAF will start from FY25E; execution of large-order backlog of manufacturing and sustained growth in MRO will drive revenue growth in double digits.
We expect HAL to deliver revenue and EBITDA CAGR of 6.8 per cent and 11.8 per cent, respectively, in FY22-24E. PBT is likely to grow at 7.7 per cent CAGR during FY22-24E. Increase in profitability with strong asset turnover is expected to result in healthy return ratios over FY23-24E.
Key risks: Dependence on government contracts and dependence on foreign OEMs for key components