This defence PSU has rallied 25% so far in May 2024, hitting a 52-week high, will it gain further?

Shares of Hindustan Aeronautics Limited (HAL) gained 1.5% to hit a fresh 52-week high of ₹4,993 apiece on the NSE on Thursday, May 23, extending the gains for the fourth straight day. The public sector undertaking (PSU) stock has seen a rally after the company reported a strong growth in net profit in the quarter ending March 2024.

The defence PSU stock has gained more than 235% from its 52-week low of ₹1489.85 touched on May 25, last year. In the last one week, shares of HAL have gained more than 7% and over 30% in the past month.

The state-owned company has seen a fresh consolidation in its share prices after encouraging numbers in its fourth quarter results for the financial year 2023-24 (Q4FY24). The company released its Q4 results on May 16.

Since the release of the March quarter results the stock closed higher in 5 of the six sessions.

Recent rally in the stock is aided by strong Q4 results

HAL reported a 52.18% year-on-year (YoY) growth in its net profit at ₹4,308 crore for the quarter ending on March 31, 2024. While the company’s consolidated total revenue grew 16% YoY to ₹15,236 crore, its earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter rose 82% YoY to ₹5,913 crore.

The public sector undertaking (PSU) has seen consistent YoY growth in its consolidated net profit in every quarter of FY24. HAL’s net profit in Q1FY24 stood at ₹814 crore, a robust growth of about 31% YoY from ₹620 crore in the year-ago period. In Q2, the net profit marginally increased to ₹1,236.67 crore from ₹1,221 crore in the corresponding quarter a year ago.

For the third quarter ending on December 31, 2023, HAL’s net profit grew by 9% to ₹1,261 crore compared to ₹1,155.19 crore in the corresponding period of the previous fiscal year.

The defence PSU also achieved its highest-ever revenue from operations at over ₹29,810 crore in FY24. HAL has witnessed 31% YoY growth in its net profit at ₹7,621 crore in FY24.

The company’s total revenue for the year was up by 13% YoY at ₹32,278 crore. The EBITDA for the entire financial year rose 46% to ₹9,741 crore.

Strong order book grabs investors attention

Apart from the strong financial performance, the market's positive outlook on HAL's share prices is also bolstered by the company's robust order book.

HAL has an order pipeline of ₹3.9 lakh crore over the next eight years, backed by the Indian Air Force's fleet management and prioritisation of legacy fleet and platform replacements.

HAL recently secured an order from the Government of India for 34 new advanced light helicopters. Earlier this year, the Cabinet Committee on Security (CCS) approved defence deals totalling ₹35,000 crores, of which HAL was awarded a ₹19,500 crore contract for its BrahMos missiles.

The PSU also signed a contract with Guyana Defence Forces for two Hindustan228 aircraft. HAL's capabilities are expected to receive a major shot in the arm following its Memorandum of Association with USA' General Electric Co.

The two companies announced an understanding of the transfer of technologies for manufacturing jets in June 2023. The agreement includes the potential joint production of GE Aerospace’s F414 engines in India which will be used to power Tejas fighter jets.

HAL shares closed at ₹4,945 apiece, up 0.48% on the NSE.