Hindustan Aeronautics Ltd. share price target

Hindustan Aeronautics (HAL) is a market leader in aerospace defense. It boasts a strong order book of INR1.8t as of 31st Mar’25, along with a promising prospect pipeline of INR6t, which is likely to be awarded over the next few years.

Hindustan Aeronautics Limited (HAL) has clocked revenue of INR 304bn in FY25 (vs INR 303.8bn in FY24).
Revenue was ~6% below our estimate of INR 322.4bn, mainly because of shortfall in delivery of ALH-Dhruv and other manufacturing revenue.

GE Aerospace has delivered the first of 99 (nos.) F404-IN20 engines to HAL for Tejas Mk 1A. We see this is a vital development that allays execution risk concerns. At Aero India, HAL expressed confidence in receiving 12 (nos.) F404- IN20 engines for the LCA Mk 1A this year.

In the year 2023-24, revenues of Aerospace & Defence companies are expected to remain largely stable or grow, as military programs continue to be critical to national security for many countries, especially considering rises in geopolitical tensions globally.

We attended Hindustan Aeronautics’ (HAL) earnings call. Key highlights: 1) double-digit revenue growth is likely FY25 onwards; 2) manufacturing is expected to stay subdued in FY24 with ‘repair & overhaul’ (RoH) revenue uptrend to sustain; 3) EBITDA margin (incl. other Income) might not sustain at 31% (as in Q4FY23), but is likely to remain robust owing to cost efficiencies.

Hindustan Aeronautics’ (HAL) Q4FY23 EBITDA was 8% ahead of consensus estimates mainly due to better than expected gross margin. Key highlights: 1) EBITDA margin improved QoQ to 26% at the upper end of 25-26% guidance for FY23-25; 2) provisions, as a percentage of revenue during the quarter, continued to remain high at 16.7% vs the historical range of 6-7%.

Hindustan Aeronautics’ (HAL) Q3FY23 performance was subdued owing to lower margins and below-expected revenue growth. Key highlights: 1) EBITDA margin declined to 17.4%, well below the 25-26% guidance for FY23-FY25 mainly due to higher provisions and other expenses.

We attended Hindustan Aeronautics’ (HAL) Q2FY23 earnings call. Key highlights: 1) RoH and spares proportion to stay elevated till FY24E; 2) EBITDA margin is likely to stay at 26-27% owing to higher RoH revenue and cost efficiencies.