Hindustan Aeronautics LTD - IPO Note - HEM Securities

Co have been conferred with the "Navratna" status by the GoI in June 2007 and is the largest DPSU in terms of value of production according to the MoD Annual Report 2016-2017. Co was the 39th largest aerospace company in the world in terms of revenue (in USD million) in 2016 according to Flight International. Co is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.

Strong financial track record: Co have a strong financial track record. Its revenue from operations grew from Rs 156,480 million in the Financial Year 2015 to Rs 185,549 million in the Financial Year 2017, representing a CAGR of 8.9%. As of September 30, 2017 co had cash and cash equivalents of Rs 116,992 million. Co do not have any long-term debt in its book. As of December 31, 2017, co's order book was Rs 684,610 million, which generally includes products and services to be manufactured and delivered and excludes anticipated revenues from incomplete portions of existing contracts undertaken by its joint ventures.

Strong design and development capabilities: As of December 31, 2017, co owned two trademarks, seven patents, 11 design registrations and 77 copyrights. Co's Board has mandated that 10.0% of its operating net profit from the current year can be used for Company-funded research, design and development expenditure. In addition, co have been collaborating with reputable academic and industrial institutions such as the Indian Institutes of Technology ("IITs") and Indian Institute of Science ("IISc") and have also established research chairs at IITs at Kanpur, Roorkee, Chennai, Mumbai and Kharagpur and at IISc Bengaluru which focuses on research in aeronautical engineering.

Valuation: The co is bringing the issue at p/e multiple of 15.4-15.8 on FY17 eps at price band of Rs 1215-1240/share. Co with its long credible history of research, design and development, manufacturing and maintenance has established track record in offering product life cycle support extending to periods beyond four decades. Also, co enjoys leadership Position in the Indian Aeronautical industry coupled with robust order book. Hence, looking after all this we recommend "Long term subscribe" on issue.

Source : Equity Bulls

Keywords