Hindustan Aeronautics stock gains 2% as Centre inks pact to acquire advanced light choppers

Shares of Hindustan Aeronautics (HAL) gained 2.7 percent to Rs 3,124 per share on March 14 after the defence ministry signed two contracts worth Rs 8,073 crore to acquire 34 advanced light helicopters and associated equipment for the Indian Army and the Coast Guard.

So far this year, the stock of this defence major has gained over 8 percent, as against a 0.7 percent rise in the benchmark Sensex. HAL shares had hit a 52-week high of Rs 3,428 on March 11, 2024.

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The defence ministry described the acquisition of advanced light helicopters under the Indian-IDDM (Indigenously Designed, Developed and Manufactured) category as a significant move towards indigenisation in defence manufacturing.

Out of 34 Dhruv Mk-III helicopters, the Army will get 25 and the Coast Guard will receive nine.

"The project will generate employment of an estimated 190 Lakh man-hours during its duration. It will also entail supply of equipment from more than 200 MSMEs and 70 local vendors will be involved in the indigenisation process which is likely to have a positive impact on employment generation in this sector," the ministry said.

Analysts at InCred Equities maintained an 'add' rating on HAL and raised the target price to Rs 3,680 from Rs 2,500, considering the strong order pipeline, better working capital position and margin profile.

However, delays in new orders, setbacks in aircraft delivery timeline and lower margins are believed to be the key downside risks.

“HAL plays a strategic role in India’s defence programme, being the major Indian company having specialization in aircraft manufacturing," the brokerage firm noted.

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