Hindustan Aeronautics manufacturing ramp-up supports margins as record order book drives growth

Investment View and Recommendation

Choice Equity Broking retained its BUY rating on Hindustan Aeronautics (HNAL) and raised its target price to Rs 5,650 in its August 12, 2026 Q1 FY27 result update. The broker views the company favourably because of its record order book, strategic role in India’s defence ecosystem and anticipated manufacturing-led growth phase.

Choice expects improving engine availability to support the gradual ramp-up of LCA Tejas Mk1A production. Growth in Tejas, Su-30MKI, AL-31FP engine, HTT-40 and other programmes is expected to broaden Hindustan Aeronautics’ manufacturing opportunity.

Q1 FY27 Financial Performance

Hindustan Aeronautics reported Q1 FY27 revenue of Rs 5,515 crore, up 14.4 per cent year on year and down 60.4 per cent quarter on quarter. Revenue was broadly in line with Choice Institutional Equities’ estimate of Rs 5,301 crore.

The EBITDA and PAT beat, alongside margin expansion, strengthened Choice’s confidence in the resilience of Hindustan Aeronautics’ earnings.

Manufacturing Ramp-Up and Growth Outlook

Management has guided for double-digit revenue growth in FY27 with a stable margin. It also expects manufacturing contribution to rise as Tejas, HTT-40 and other platforms ramp up.

Choice expects Hindustan Aeronautics’ revenue mix to shift gradually from its current MRO-heavy profile towards higher-margin manufacturing over FY27E to FY29E. In the broker’s view, this mix shift should support stronger growth, operating leverage and further margin improvement.

• Improving engine availability is expected to support the gradual ramp-up of LCA Tejas Mk1A production.
• Tejas, Su-30MKI, AL-31FP engine, HTT-40 and other programmes are expected to broaden the manufacturing opportunity.
• A rising manufacturing contribution is expected to support the company’s transition away from its current MRO-heavy revenue profile.

Order Book and Key Monitorables

Hindustan Aeronautics has an order book of approximately Rs 2.55 lakh crore, equivalent to around 7.7 times FY26 revenue. Choice considers this order book central to the investment case.

The broker identifies Tejas execution and conversion of the large order book into revenue as the key near-term monitorables. These factors could affect the timing of the manufacturing ramp-up and the projected growth trajectory.

Earnings Estimates and Valuation

Following the stronger-than-expected profitability in Q1 FY27, Choice raised its FY27E and FY28E EPS estimates by 4.0 per cent and 5.9 per cent, respectively. Its revised forecasts are as follows:

Choice expects revenue and PAT to grow at 15.3 per cent and 17.1 per cent CAGR, respectively, over FY26 to FY29E. The revised target price of Rs 5,650 is based on valuing Hindustan Aeronautics at 30 times FY28E EPS.