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Hindustan Aeronautics Shares Surge Following Sukhoi Deal with Defense Ministry

Hindustan Aeronautics Limited (HAL) stocks went up by a strong 2.33% on 13 December 2024, after the MoD said that it had finalized a massive contract with HAL for buying 12 Sukhoi Su-30 MKI aircraft along with equipment valued at around ₹13,500 crore. The contract will help the Indian Air Force enhance its operational strengths and improve India’s preparedness on the defense front. 

This triggered an upside in the share price of HAL, which rose to an intraday high of ₹4,770. Though the share price closed the trading session marginally higher by 0.13% at ₹4,667.25, analysts continue to remain optimistic about the company’s prospects and indicate further upside potential. After the deal, analysts at UBS have placed a target price of ₹5,700 per share, indicating upside of over 22% from the latest closing price. 

HAL’s Nasik division would manufacture the aircraft, and these Su-30 MKIs will have 62.6% indigenous content, representing the rising Indian defense industry contribution to critical components of the country. The deal not only boosts HAL’s order backlog but also provides future revenue visibility, with the estimated total backlog standing close to ₹1 trillion. 

The deal is likely to create a ripple effect across the broader defence ecosystem. Other companies such as Bharat Electronics (BEL), Astra Microwave, and Data Patterns are expected to be beneficiaries as they would be supplying critical electronics systems for the Sukhoi aircraft. Bharat Dynamics (BDL) will supply missiles, while Mishra Dhatu Nigam (Midhani) will provide materials for aircraft engines. 

The fact that HAL is successful and executing upgrade contracts on the existing Su-30 MKIs will make it the largest aerospace and defense company in India. It has a market capitalization of ₹312,134 crore and is one of the leaders in the defence sector. 

The company’s diverse operations include aircraft and helicopter manufacturing, component production, satellite structures, and maintenance services, spread across multiple Indian cities. HAL plays a strategic role in India’s aerospace and defence sector, which is pivotal to the nation’s long-term security objectives.