HAL Vs Bharat Dynamics – Profitability, Future Prospects and More!

HAL Vs Bharat Dynamics: Countries have been at war with each other for centuries now. The motive behind these international conflicts is generally to gain more territorial power which will ultimately increase their diplomatic power. The ongoing Russia-Ukraine war is a real-time example.

This is the reason every country spends not millions but billions of dollars to keep its Defence sector ready for any incoming threat. Apart from multiple incentives the government also encourages companies to strengthen the sector by providing the latest equipment.

In this article, we will take a look at two of the biggest companies engaged in producing world-class defence equipment in India. Keep reading to find out!



Table of Contents

  1. Industry Overview

  2. About the companies

  3. HAL Vs Bharat Dynamics: Revenue

  4. HAL Vs Bharat Dynamics: Profitability

  5. HAL Vs Bharat Dynamics: How much are the investors earning?

  6. HAL Vs Bharat Dynamics: Valuation Parameter

  7. HAL Vs Bharat Dynamics: Shareholding pattern

  8. Future prospects of the companies

  9. In closing

Industry Overview

The defence industry of India is a strategically important sector for the country. In fact, the Indian military forces are one of the largest in the world with over 14.4 lakh (1.44 million) active personnel. 

Over the last five years, India has been ranked among the top importers of defence equipment to gain technological advantages over rival countries. However, to push atma nirbharta (self-reliance) in the sector, the government recently published a list banning more than 100 weapons and systems over the next five years.

India’s defence manufacturing sector has been witnessing a CAGR of 3.9% between 2016 and 2020. The Indian government has set the defence production target at US$ 25.00 billion by 2025 (including US$ 5 billion from exports by 2025).

About the companies

Hindustan Aeronautics Ltd (HAL)

HAL logo

Hindustan Aeronautics Limited (HAL) is an Indian state-owned aerospace and defence company which was established in 1940. It stands as one of the oldest and largest aerospace and defence manufacturers in the world today.

HAL currently has 11 dedicated Research and development (R&D) centres and 21 manufacturing divisions under 4 production units spread across India.

Bharat Dynamics Ltd (BDL)

Bharat Dynamics logo

Bharat Dynamics Limited (BDL) is one of India’s manufacturers of ammunitions and missile systems which was established in the year 1970.  BDL was established to be a manufacturing base for guided weapon systems and began with a pool of engineers drawn from Indian Ordnance Factories, DRDO and aerospace industries

BDL has three manufacturing units, located in Hyderabad, Medak district, and Visakhapatnam.  Two new units are planned in Ranga Reddy district, Telangana and Maharashtra.

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HAL Vs Bharat Dynamics: Revenue

HAL has shown an increasing trend in their revenue in the last three years, However, Bharat dynamics have seen a downward trend. In FY21, HAL earned a total revenue of Rs 22,755 Cr which was an increase of 6.11%. On the other hand,  Bharat Dynamics Ltd reported total revenue of Rs 1,914 Cr which was a downfall of -38.36% from FY20. Revenue 20172018201920202021 HAL (Rs in Cr)17,95018,52020,00821,44522,755 (Revenue growth in %)7.11%3.17%8.04%7.18%6.11% Bharat Dynamics (Rs in Cr)4,8874,5883,0693,1051,914 (Revenue growth in %)19.81%-6%-33.09%1.16%-38.36%

HAL Vs Bharat Dynamics: Profitability

The gross profit margin shows how much profit a company makes after paying off its Cost of Goods Sold (COGS). Generally, a higher ratio is considered better. In the last 3 years, HAL has seen an upward trend in their GP margin whereas Bharat Dynamics Ltd has seen a decreasing trend.

The operating profit ratio shows how efficiently a company is able to generate profit through its core operations. The higher the ratio, the better it is. In the last 3 years, HAL has been able to maintain a constant ratio while Bharat Dynamics Ltd has seen a decline.

The NP margin determines how much net income is generated as a percentage of revenues received. An increasing ratio is seen as a good sign. In the last three years, HAL has seen a rising ratio whereas Bharat Dynamics Ltd has seen a decline from the previous year.  Profit Margin ratios 20172018201920202021 Gross Profit Margin (%) HAL23.9423.1424.5824.225.08 Bharat Dynamics Ltd17.7718.3224.6927.2522.95 Operating Margin (%) HAL19.9717.9119.4519.5519.9 Bharat Dynamics Ltd16.516.9322.0124.1318.01 Net Profit Margin (%) HAL4.0610.6111.6313.4114.21 Bharat Dynamics Ltd10.7211.5113.7717.2313.47

HAL Vs Bharat Dynamics: How much are the investors earning?

The ROE  shows how well a company is managing the capital that shareholders have invested in it. The ROE of HAL has seen an increasing trend whereas Bharat dynamics have seen a decline in the last 3 years.

The ROCE measures the efficiency with which the management is using its capital i.e, equity and debt to generate profit for the company and its shareholders. Over the last 3 years, HAL has seen a declining trend in its ratio. Bharat Dynamics saw a drastic fall from FY20 to FY21.

Earnings per share (EPS) shows how much a company earns for each share. The higher the ratio, the better it is. HAL has seen an increased ratio, on the other hand, Bharat dynamics saw a decline in its EPS as well. Return ratios 20172018201920202021 Return On Equity (ROE) HAL22.1117.9121.5622.722.57 Bharat Dynamics Ltd26.2625.7620.2422.159.82 Return On Capital Employed (ROCE) HAL29.0927.229.2724.4626.21 Bharat Dynamics Ltd40.4137.8932.3330.913.15 Earnings Per Share (EPS) HAL0.730.60.70.860.97 Bharat Dynamics Ltd42.890.290.230.290.14 Dividend Yield HAL02.852.796.193.02 Bharat Dynamics Ltd02.22.444.752.21

HAL Vs Bharat Dynamics: Valuation Parameter

The P/E ratio is one of the most widely used metrics to understand the valuation of a company. It interprets what the market is willing to pay today for a stock based on its past or future earnings. In FY21, Bharat Dynamics had a higher PE ratio of 23.65  than HAL which had 10.27.

The P/B ratio measures the market’s valuation of a company relative to its book value. Companies having lower ratios are considered to be solid investments. In comparison, HAL had a lower P/B ratio of 2.16 whereas Bharat Dynamics Ltd had 2.29.   

The EV/EBITDA ratio is used as a valuation tool to compare the value of a company, debt included, to the company’s cash earnings less non-cash expenses. A lower ratio means that the company is undervalued. Valuation Parameter 20172018201920202021 Price to Earnings Ratio (PE) HAL018.9610.196.1810.27 Bharat Dynamics Ltd013.6512.36.3523.65 Price to Book Value (P/B) HAL03.971.961.352.16 Bharat Dynamics Ltd03.732.321.312.29 EV/EBITDA HAL-2.277.625.644.54.57 Bharat Dynamics Ltd-1.858.156.373.2410.31

HAL Vs Bharat Dynamics: Shareholding pattern

HAL Vs Bharat Dynamics - Shareholding

Future prospects of the companies

Hindustan Aeronautics Ltd:

Apart from being the oldest and biggest defence manufacturer in the country, the company is looking to expand further. In that attempt, it has forged partnerships with multiple companies to venture into multiple avenues.

For instance, HAL entered into MoU with ADA for Design and Development of Advanced Medium Combat Aircraft (AMCA). It is also looking to expand its presence in the international markets.

Futuristic projects on the anvil such as LCA MkII, Advanced Medium Combat Aircraft (AMCA), Indian Multirole Helicopter (IMRH), Twin Engine Deck Based Fighter (TEDBF), Aero Engines Development etc., will ensure their technological lead in the years to come.

Bharat Dynamics Ltd:

The negative list of imports released by the government became a golden opportunity for the government to get orders for these products from the Indian Armed Forces in the coming years. The company will also expand internationally as it has already got leads for the export of missiles from about 9 countries.

 The company is also looking to strengthen its products portfolio which includes Akash and Lightweight Torpedo along with Air Air missiles, Air to surface weapons, ATGMs, Heavyweight Torpedoes and CounterMeasure Systems. 

In closing

In this article, we looked at two of the biggest companies engaged in manufacturing equipment for the defence sector of India. Two of the oldest companies in India are giving a neck to neck competition with each other.

Future leadership will depend on the strategies adopted by the companies going forward. That’s all for this post on HAL Vs Bharat Dynamics. Have you invested in either of these companies? Let us know in the comments below.

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