CMP: ₹4,769.20
Hindustan Aeronautics’ (HAL) efficiency missed road’s estimates primarily on the again of weak execution.
Key factors: EBITDA rose 13 per cent YoY to ₹990 crore (highest-ever for Q1); EBITDA margin was at a wholesome stage of twenty-two.8 per cent; An revenue tax refund of ₹440 crore resulted in PAT progress of 77 per cent YoY; and HAL made two investments value (cumulatively) ₹4.96 crore with different defence corporations.
In our view, HAL’s agency order e-book and a sturdy order funnel (potential orders), together with now near-finalisation 97 nos. of further Tejas Mk-1A present it an extended runway for progress. Nonetheless, manufacturing momentum is predicted to select up solely from execution of 83 nos. LCA Mk-1A. That stated, we count on RoH income to develop at 8–10 per cent p.a., offering stability to earnings and higher margins.
We retain our ADD score on HAL with an unchanged TP of ₹5,170 (DCF-based methodology).
Key dangers: Delay in execution of current 83 nos. Tejas Mk-1A orders; Delay in receipt of additional orders for which AoN has been executed; Margin decline owing to greater uncooked materials costs.
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