Buy Hindustan Aeronautics Ltd For Target Rs.5,570 By Choice Broking Ltd
Q1 Steady, H2 Set for Full Thrust
We believe HNAL delivered a reasonably solid quarter operationally, even though profitability witnessed some contraction. In our view, the company remains firmly on track to deliver a stronger H2 in FY26, with revenue acceleration led by the ramp-up of the Tejas program.
Although HNAL has now completed assembly of 11 single-seat Tejas Mk1A fighters (10 at Bengaluru, 1 at Nashik) and 9 trainer variants— taking the total to 19 fully-built airframes, the main constraint remains engine supply. To date, only two GE engines have been received; however, we expect the pace to pick up with an additional 10 engines likely to arrive by December 2025. Despite recent India–US trade tension, we believe this supply will go through as per contractual obligations, particularly since the engine in question is an older generation model with no export restrictions of strategic concern.
We remain constructive on HNAL’s medium-term growth trajectory. In our assessment, the Tejas Mk1A delivery schedule will be a key investor watchpoint in the coming quarters. However, given the recent correction in the stock, we upgrade our rating to BUY (from ADD). We revise our estimates and maintain our target price at INR 5,570, valuing the stock at 35x of the average of FY27/28E EPS.
Margins expand despite revenue miss
* Revenue for Q1FY26 up by 10.8% YoY & down by 64.8% QoQ at INR 48.2 Bn (vs CIE est. INR 53.8 Bn)
* EBIDTA for Q1FY26 up by 29.4% YoY and down by 75.8% QoQ at INR 12.8 Bn (vs CIE est. INR 12.5 Bn). The EBITDA Margin stood at 26.6%, improved by 382bps YoY (vs CIE est. of 23.3%)
* PAT for Q1FY26 down by 4.4% YoY and down 65.5% QoQ at INR 13.7 Bn (vs CIE est. INR 14.3 Bn). PAT Margin contacted by 456bps YoY, reaching 28.5% (vs CIE est. 26.6%)
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