Hindustan Aeronautics sees Tejas Mk1A deliveries support project execution growth
Hindustan Aeronautics Ltd.
Buy
₹4,843
₹4,819.9
₹5,900
21.83%
Investment View and 2QFY27 Performance
In its November 12, 2026 result update, Motilal Oswal Financial Services retained its Buy recommendation on Hindustan Aeronautics Limited (HAL). The broker characterised 2QFY27 performance as decent, with revenue in line with its estimate, lower operating margin and PAT slightly ahead of expectations.
| Particulars | 2QFY27 | YoY change | Broker estimate |
|---|---|---|---|
| Revenue | Rs 7,610 crore | 15% | In line |
| Gross margin | 52.9% | Down 320 bps | 57.0% |
| EBITDA | Rs 1,740 crore | 12% | Rs 1,840 crore |
| EBITDA margin | 22.8% | — | 24.5% |
| PAT | Rs 1,940 crore | 16% | Slightly ahead |
Lower employee costs, other expenses and provisions partly mitigated the margin pressure. PAT exceeded the broker's expectation because depreciation was lower than expected and the share of profit from joint ventures was higher.
In 1HFY27, revenue, EBITDA and PAT each increased 15% YoY to Rs 13,100 crore, Rs 3,270 crore and Rs 3,530 crore, respectively. EBITDA margin expanded 10 basis points YoY to 24.9%.
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Tejas Mk1A Execution and Growth Outlook
The Tejas Mk1A programme remains delayed. Management commentary cited by the broker indicated that HAL had 27 aircraft airframes ready as of September 2026 and that the programme was 90–95% complete. Remaining work included final-stage testing and integration of missiles and AESA radar.
GE supplied three F404 engines in August 2026 and four in September 2026, taking cumulative deliveries to 14 engines. With engine supply improving, management expects to deliver the first 10 Tejas Mk1A aircraft to the Indian Air Force by March 2027. Motilal Oswal has assumed six Tejas Mk1A deliveries in FY27 followed by a gradual ramp-up.
Order Pipeline and Capacity Expansion
The broker views recent Defence Acquisition Council approvals as strengthening HAL's opportunity pipeline. Since September 2026, approvals worth around Rs 3.2 lakh crore have been accorded, with 98% and 82% of the September and October values earmarked for domestic industry.
HAL could benefit from potential orders for advanced light helicopters, light multi-role helicopters and special utility helicopters. A second Shakti engine production line at Koraput, requiring investment of Rs 220 crore and capable of producing up to 100 engines annually by FY29, should support ALH Dhruv and LCH Prachand production.
HAL's order book stood at around Rs 2.5 lakh crore as of March 31, 2026, while Motilal Oswal expects execution across other projects to scale up on the back of an implied order book of around Rs 2.4 lakh crore.
Estimates, Valuation and Target Price
Motilal Oswal broadly maintained its FY27–FY29 estimates and forecasts revenue, EBITDA and PAT CAGR of 23%, 19% and 17%, respectively, over FY26–FY29.
| Financial year | Forecast EBITDA margin |
|---|---|
| FY27 | 29.4% |
| FY28 | 28.9% |
| FY29 | 27.2% |
The broker expects EBITDA margin to moderate as manufacturing revenue forms a larger mix. It raised the target price to Rs 5,900 from Rs 5,800 by rolling valuation forward to December 2028 earnings. The target is based on the average of DCF and 30 times two-year forward earnings.
Key Risks
- Slower finalisation of large platform orders.
- Further delays in components such as Tejas Mk1A engines.
- Delayed Ministry of Defence payments.
- Higher private-sector participation.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
