HAL is up 65% YoY but is still not expensive. The entire Defense sector is witnessing superior growth due to the Govt’s push & has a lot of steam left. HAL is the leader of the pack & has a lot of room for appreciation. It will continue to do well for next 10 years: This view was expressed by Madhu Kela, Vikas Khemani and Kush Bohra at a Diwali Dhamaka party organized by moneycontrol.com.
Madhu Kela pointed out that a number of fund managers and investors were reluctant to invest in PSU stocks in the misconception that they were poorly governed and did not have growth prospects. However, the spectacular success of PSU stocks like Hindustan Aeronautics Limited (‘HAL’) has totally changed the perception.
“HAL has broken the myth that you can’t make money in public-sector companies,” he rightly stated.
“Forget individual companies. The bigger point is that, at the end of the day, these are all cycles. If you look at a 15-year cycle, they would have actually lost money or they may not have made as much money as a lot of private companies. But, if you look at it differently, these companies (PSUs) have done exceptionally well point-to-point… that’s why our philosophy is always to be open-minded and always listen to what the market has to say and be open to responding to the reality,” he added.
Vikas Khemani of Carnelian Asset Management revealed that he is one of the lucky investors in HAL and had bought the stock when it was quoting at throwaway valuations.
“We bought it when it had a dividend yield of 5-6 percent. So, you have a fast-growing sector, with the dividend yield and which the government is pushing. What else can you expect (for the stock than appreciation) in a sector which is witnessing superior growth?” he stated.
Khemani emphasized that in the USA, companies like Lockheed Martin had become gigantic conglomerates due to the unstinting support of the Government and the same story is likely to play out in India under the leadership of Prime Minister Narendra Modi.
“If you look at the US, a lot of the companies, such as Lockheed Martin, have become big with the support of government initiatives such as the G2G (government-to-government) agreements. For the first time, we are beginning to see such things happening in India“, he stated.
G2G agreements create enormous confidence in the buyer because of guarantees from the vendor’s government on performance parameters etc.
Khemani emphasized that if the stock is evaluatedd from the proper perspective, the stock price is not expensive.
“The government’s vision is to export defence-related equipment and HAL is a leader in that space. The stock is also not very expensive and will continue to do well for 10 years,” he opined.
Kush Bohra of Kushbora.com endorsed the view of the other experts that HAL has still a lot of scope for appreciation, given its position in a fast-growing sector.
“The entire sector still has a lot of steam and HAL, as the leader in the pack, has a lot of room for appreciation,” he stated in clear terms.
CLSA has maintained an “Outperform” rating on HAL. It has cautioned that a shift of key aerospace programme to PPP mode would be a risk
#CNBCTV18Market | CLSA maintains Outperform call on HAL, but believes, a shift of key aerospace programme to PPP mode would be a risk pic.twitter.com/pxuyxGxp0W
— CNBC-TV18 (@CNBCTV18Live) November 13, 2023
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