Add Hindustan Aeronautics Ltd for the Target Rs. 5,050 by Choice Institutional Equities
Muted Quarter; Lifecycle Visibility Remains Intact
We remain positive on HNAL, but this was clearly a softer quarter from an execution standpoint. While the headline numbers were not very strong, the underlying narrative continues to move in the right direction.
From what we see, the story is gradually shifting. HNAL is not just a delivery-led manufacturing play anymore but increasingly building a steady layer of lifecycle revenues. The ROH and spare s ecosystem, backed by a large installed base (Su-30, ALH, LCH, engines), is now becoming a meaningful contributor. In our view, this adds a more predictable revenue layer and reduces dependence on lumpy aircraft deliveries. Another important takeaway for us was management’s comment that no production lines are idle, which suggests that capacity utilisation is better than what delivery numbers indicate. This gives some comfort that execution is more a timing issue rather than a demand-side concern.
That said, near-term performance will still depend on delivery ramp-up, especially Tejas Mk-1A, which remains a key monitorable. On margins, the recovery is still not fully visible, and this was evident in the YoY contraction. While QoQ improvement was strong, we would wait for sustained margin normalisation driven by better execution and mix.
Over the medium term, we believe the setup remains favourable. With multiple production lines active and a strong order pipeline, incremental deliveries should support operating leverage. More importantly, every new platform inducted expands the future ROH funnel, which in our view is the key driver of long-term earnings visibility. Overall, we see HNAL evolving into a platform lifecycle play with improving revenue visibility, though near-term growth will remain dependent on execution and delivery timelines.
Muted Topline; Margin Recovery Still Weak
* Revenue for Q4FY26 up by 1.8% YoY and up by 81.1% QoQ at INR 139.4 Bn (vs CIE est. INR 131.0 Bn)
* EBIDTA for Q4FY26 down by 4.5% YoY and up by 170.4% QoQ at INR 50.6 Bn (vs CIE est. INR 47.4 Bn). EBITDA margin stood at 36.3%, contracted by 237 bps YoY (vs CIE est. of 36.2%)
* PAT for Q4FY26 up by 5.5% YoY and up by 124.8% QoQ at INR 42.0 Bn (vs CIE est. INR 36.7 Bn). PAT margin expanded by 107 bps YoY, reaching 30.1% (vs CIE est. 28.0%)
View & Valuation: In our view, HNAL’s core growth drivers remain intact, backed by a strong and diversified order book, improving execution visibility and structural tailwinds from defence indigenisation. Tejas Mk-1A deliveries remain a key near-term monitorable. Accordingly, we revise our FY27E and FY28E EPS estimate downwards by 0.2% and upwards by 5.8%, respectively, and now expect Revenue/EBITDA/PAT to expand at a CAGR of 12.2%/12.6%/12.7% over FY27–29E. We maintain our ‘BUY’ rating with an upgraded target price of INR 5,050, valuing the stock at 30x of FY28E EPS
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