Buy Hindustan Aeronautics Limited Ltd for the Target Rs. 5,050 by Choice Institutional Equities
Key Conference Call Highlights
Guidance
* Top-line Projection: The management guided for a double-digit revenue growth of 10–12% for FY27E
* Margin Durability: Expected to maintain stable EBITDA margin in the 30–31% range for FY27E
* Revenue Composition Shift: Over time, manufacturing sales are expected to grow and shift the revenue composition to a 50:50 split between manufacturing and ROH (currently ~30:70), without impacting the overall 30% margin profile
Order Book & Visibility
* Record Backlog: The total order book expanded significantly to INR 254,538 Cr at the end of FY26
* FY26 Inflows: Fresh order inflows for the year totalled INR 97,028 Cr, comprising INR 69,668 Cr in manufacturing and INR 26,539 Cr in ROH
* Major Contract Wins: Included 97 LCA Mk1A for the IAF, 6 ALH Mk III MR-2 for ICG, 10 ALH Dhruv NG for Pawan Hans and 8 Do-228 for ICG
* Order Pipeline: HNAL anticipates an additional INR 90,000 Cr in orders in the next two years, driven by 143 ALH for the Army/IAF, Su-30 upgrades and 40 Do-228 upgrades
Key Programme Updates & Delivery Timelines
* LCA Mk1A: Targeted delivery of ~20 aircraft in FY27E; GE has committed to supplying 15–20 engines, with deliveries slated to begin between August and September
* HTT-40 Trainer: Supply chain issues with Honeywell engines have stabilised, paving the way for targeted deliveries of 20+ units in FY27E via two active production lines
* Tejas Mk2 & Engines: Prototype rollout for Tejas Mk2 is scheduled for the last quarter of FY27E (by March), with GE-414 engine orders anticipated in approximately two years
* Sukhoi-30: Execution of the 12 Su-30 aircraft order will begin in FY28, while the broader Su-30 upgrade is currently a 5–6-year design programme, expecting CCS approval this year
* Advanced Programmes: Uttam radar integration is planned for the incoming 97 LCA programme batch. A rotary UAV prototype is in groundtesting and the CATS Warrior UAV flight is expected next year
Supply Chain, Margin & Cost Management
* Supply Chain Resilience: Acknowledged minor delays in the global supply chain, but delivery schedules for HTT-40 and Su-30 remain intact due to pre-placed purchase orders and vendor diversification
* Inventory Buffer: HNAL built up an inventory of INR 8,100 Cr for the LCA programme, effectively shielding the company from near-term material cost increases for FY27E
* Margin Protection Mechanism: Exchange Rate Variation (ERV) and material escalation clauses are embedded in existing contracts, inherently protecting the cost of production
* Labour Efficiency: The management is actively balancing insourcing and outsourcing strategies to maintain the lowest possible manpower cost while functioning as the core integrator
Capital Allocation & Strategic Initiatives
* Capex Vision 2030: Planned investment of INR 12,000 Cr by 2030 to construct manufacturing infrastructure for LCA Mk2, IMRH engines, and SSLV projects
* Current Capital Deployment: FY26 R&D expenditure stood at INR 2,794 Cr (~8.4% of revenue) alongside capex of INR 2,386 Cr
* Strategic Partnerships: Signed industrialisation agreements with Safran for LEAP engine parts, secured a non-exclusive licence to manufacture the SSLV from ISRO and signed an MoU for producing SJ-100 commuter aircraft in India
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