About the Company
Hindustan Aeronautics Limited (HAL), was incorporated in 1964 by amalgamation of Hindustan Aircraft Limited and Aeronautics India Limited, is a Navratana Company. Government of India (GoI) holds majority stake of 89.97% as on March 31, 2020. HAL is into carrying out design, development, manufacture, repair and overhaul of aircraft, helicopter, engines and related systems like avionics, instruments and accessories primarily serving Indian defense programme. It also manufactures the structural parts of various Satellite Launch Vehicles of the Indian Space Research Organization (ISRO)
Conclusion
On Valuation
front company is doing okay but rising debt levels for Working Capital
Management is a drag. Also, it caters to government which is why debtors’ days
are worsening.
The hope for the company
right now is increase Defense Supplies on back of Atma Nirbhar Mission. Company
also needs to work on creating export markets
All in all,
though I have invested a very small quantity for exposure to defense sector I won’t
add any fresh investments here can continue holding my stake.
Based on Technical
Structure I may exit on bounce
Analysis
Strengths
- HAL’s strategic importance to Indian Defense Sector and Government of India ownership
- Continuing healthy order book position
- Strong financial risk profile marked by stable profitability and cash accruals
- · Fully integrated production capabilities and continually improving product portfolio
- · Strong Research and Development capabilities
Weakness
- Increasing reliance on WC borrowings while build-up of receivables continue
- Prospects of company depend on Indian Defense sector with limited exports
- Increasing private sector participation
Pros:
- Stock is providing a good dividend yield of 3.90%
- Company has been maintaining a healthy dividend pay-out of 40.61%
- Contingent liabilities of Rs.10574.78 Cr.
- Company has
high debtors of 195.83 days.
Technical Setup
- Currently on Weekly Technical
Structure looks weak
- Stock has closed below Weekly EMA at 865
- To regain strength stock needs to claw
back above 865 on weekly closing basis
- Next Support is at 780 which is convergence
of 50 and 100 EMA