HAL shares gain as GE Aerospace starts supplies for LCA engines. Should you Buy, Sell or Hold the stock?

Stock Market Today: HAL or Hindustan Aeronautics Ltd shares continue to gains and have risen more than 26% in last one Month. The HAL share price added further to gains on Thursday post news flow around GE Aerospace starting supplies for Light Combat Aircraft engines.

HAL- Light Combat Aircraft engine supplies start

Hindustan Aeronautics Ltd or HAL in its release on the exchanges commenting on media news around GE Delivering First Engine for Indigenous LCA Mk1A” pertaining to Hindustan Aeronautics Limited (HAL), said that “It is to clarify that, the Engine has been handed over to our Freight Forwarder at USA which is expected to be received at HAL premises within a week time.

The start of supplies for engines by GE for Light Combat Aircraft are looked at in positive light looking at the fact that all eyes have been on the pace of execution of orders by Hindustan Aeronautics Ltd or HAL. HAL certainly has a impressive ordr book which is growing. However for earnings growth visibility to improve the execution remains important.

Analysts Views

ICICI Securities reacting to the development on GE Aerospace delivering the first of 99 (nos.) F404-IN20 engines to HAL for the light combat aircraft Tejas Mk 1A. said that “In our view, this development allays concerns on the execution front”.

ICICI Securities expects revenue growth of 25–28% through to FY27, based on the order book (OB) estimated at more than ₹1.3 trillion (1,30,000 crore). Besides, there are further orders of 97 (nos.) Tejas Mk 1A and 156 (nos.) LCH Prachand in the pipeline added the Research house and brokerage.

As a result of reduced execution concerns and lower risk on the earnings estimates, leads ICICI Securities to roll back their WACC (weighted average cost of capital) to 11% from earlier 12%, resulting in a revised Target price of ₹5,000 (earlier ₹4,065). ICICI Securities thereby has upgraded HAL to BUY (from earlier Add Ratings) and recommend it as their top pick among DPSU's (Public Sector Undertakings)

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.