HAL ready for take off

HAL rose 3.07% to Rs. 4,387 today, with the stock touching an intraday high of Rs. 4,393.95. The move comes amid reports that the Defence Ministry has received around 10 bids from Indian public and private sector companies for a more than Rs. 30,000 crore project to procure 87 Medium-Altitude Long-Endurance (MALE) UAVs for the Indian Air Force.

Trigger:

Defence Ministry reportedly received around 10 bids for 87 MALE UAVs.

Project size is estimated at over Rs. 30,000 crore.

The programme is aimed at strengthening indigenous defence manufacturing and reducing import dependence.

HAL, L&T and other defence companies are expected to remain in focus.

For HAL, the opportunity is more strategic than just one order. MALE UAVs are used for intelligence, surveillance, reconnaissance, target tracking and border monitoring, and are increasingly central to modern air warfare. If HAL is part of the winning ecosystem,  either as prime contractor, manufacturing partner, systems integrator or lifecycle-support provider, it can expand its defence aviation footprint beyond manned aircraft into unmanned platforms.

This matters because HAL already has deep relationships with the Indian Air Force, strong aerospace manufacturing capabilities, certification experience and long-cycle maintenance infrastructure. A large UAV programme can give it additional revenue visibility, but more importantly, it can strengthen its role in next-generation defence technologies such as drones, avionics, mission systems, sensors, ground control systems and platform sustainment.

Mr. S P Tulsian’s view: HAL’s market cap of Rs. 2.83 lakh crore and enterprise value of Rs. 2.33 lakh crore imply a PE multiple of 20.4x net of cash of Rs. 670 per share, based on FY27E EPS of Rs. 175. This makes HAL the cheapest PSU defence stock despite being India’s largest defence company. He maintains a bullish view on this large-cap, fundamentally strong stock, capable of rising to Rs. 10,000 in the next two years.