Momentum Pick: Will HAL shares soar to new highs post 30% rally in 9 sessions?

Shares of Hindustan Aeronautics (HAL) have rallied nearly 30% remaining unbeaten in nine trading sessions and making fresh 52-week highs on a daily basis. The stock price is expected to move up to 10% albeit with minor hiccups as the recent rally has taken the stock into a strongly overbought zone, experts say.

On Thursday, the stock fell nearly 1.5% on the intraday basis with momentum indicators RSI and MFI at 91.2 and 97.6, according to Trendlyne. It is also above its 50-day and 200-day simple moving averages (SMAs).

The stock is expected to continue its strong upward momentum in the coming days, derivatives analyst at SAMCO Securities Ashwin Ramani tells ETMarkets. On technical charts, HAL has been moving in higher highs and higher lows since November 23, 2023, he said.

One of the highlights has been HAL's stability as the stock has traded at a 1-year beta of 0.2 despite a robust rally. HAL shares have returned over 90% in the past 12 months outperforming the Nifty, which has given over 12% returns during this time.

The price took resistance around the 2,086 levels on the daily chart twice on August 24 and September 11, gave a breakout on November 16, and later retested the same level on November 22, Ramani informed as he said that it has sharply risen since then.

The F&O counter has maximum CALL open interest at 3,000 Strike, which is likely to act as an immediate resistance while the level of 2,500 is likely to act as a support, he adds.


Ramani warns investors on the likelihood of a halt in the ongoing rally if the higher high and higher low formation is negated and the stock gives a lower closing.

Analyst Nilesh Jain also expects HAL price to further extend up to 10% over the Wednesday closing price of Rs 2,714.60 on the NSE as its strong uptrend remains intact in his view. The stock may test levels of Rs 2,850/3,000, he adds. The Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking suggests buying in a staggered manner while he puts support at Rs 2,550.

Fundamental View
HAL is taking steps to boost its capabilities and pledged to spend over Rs 2,000 crore this year on research and development in line with its overall approach towards indigenisation of critical avionics and related hardware, a PTI report quoting a senior official of the state-run entity said on Wednesday.

The public sector aerospace company reported a marginal YoY rise in consolidated net profit at Rs 1,236.67 crore for the July-September quarter. It was Rs 1,221 crore in the corresponding quarter of last fiscal. Consolidated revenue from operations rose 9.5% on-year to Rs 5,635.7 crore in the quarter under review, compared to Rs 5,144.79 crore in September 2022.

HAL has a proven track record of growth, having achieved a CAGR of 8% over FY 2018-23 and expanding its EBITDA margin from 18.7% in FY2018 to 24.7% in FY2023 and moving forward, the company is expected to maintain its growth trajectory with a projected CAGR of 13% over FY 2023-26F along with a healthy EBITDA margin of 24%, aerospace & defense analyst Dipen Vakil of InCred Equities said.

HAL's robust growth outlook stems from its substantial order book of Rs 81,800 crore, which is 3X its FY23 sales, Vakil highlights adding that this provides near-term growth visibility. "Additionally, a robust order pipeline worth over Rs 48,000 crore in FY 2024F and over Rs1 lakh crore in the medium term further underpins our confidence in its execution capabilities," the INCred analyst adds.

In November this year, the Defense Acquisition Council (DAC) approved Acceptance of Necessity (AoN) for proposals worth Rs 2.3 lakh crore of which Rs 1.6 lakh crore will be accounted for by platforms that will be procured from HAL, Vakil said.

He is also of the view that its manufacturing segment will be revamped from FY25F onwards, commencing with scheduled deliveries of LCA Mk1A from Feb 2024F.
Vakil maintains an 'Add' rating on the stock.

The stock has been outperforming amid a flurry of activity in the defense sector and HAL is one of the key players in this space, Kranthi Bathini, Director-Equity Strategy at WealthMills Securities said. He remains bullish on the counter and recommends a buy with a medium to long-term perspective with an estimated upside of 15-20%.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)