Hindustan Aeronautics Ltd (HAL) share price jumped over 4 percent on Thursday after the public sector company signed a Rs 5,375 crore contract with America's GE Aviation for 99 F404 aircraft engines and support services to power the indigenous Tejas Light Combat Aircraft (LCA) Mk-1A.

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Back in February, HAL had finalised a Rs 48,000 crore deal with the Defence Ministry to supply 83 LCA aircraft to the Indian Air Force (IAF).

"This is the largest-ever deal and the purchase order placed by HAL for LCA," HAL CMD said R Madhavan said. The company is also working with GE to explore LCA's export potential, he added.

Broking firm CLSA has also maintained a buy call on Hindustan Aeronautics with a target price of Rs 1,425 — 33 percent higher than its current market price of Rs 1,071.

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"Key catalysts include Rs 330 billion in order wins in the second half of FY22, the award of contracts for its Tejas Mk 1A and a stake sale by the government," it said.

The first-quarter results of Hindustan Aeronautics showed a transformation, the brokerage said. "Its profit after tax grew 31 percent YoY led by a transformation of its balance sheet in the fourth quarter of FY21," it said. From net-debt to net-cash, the company has seen an 86 percent YoY fall in interest costs and three times rise in investment income.

However, its operations were weak which was expected with severe lockdowns in Bangalore due to the second wave of COVID-19 infections, "but HAL guided it will make-up for the lost time over rest of the year."

The brokerage maintained its buy rating as "this virtual monopoly will compound its earnings at a rate of 14 percent over FY21-26CL."

At 14:20, the stock was trading 3.05 percent or Rs 37 higher at Rs 1105 on BSE.

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First Published:Aug 18, 2021 4:01 PM IST