Hindustan Aeronautics growth hinges on Tejas Mk1A deliveries and Rs 1 trillion pipeline

Investment View and Valuation

Prabhudas Lilladher's November 13, 2026 result update on Hindustan Aeronautics maintained a BUY rating and raised the target price to Rs 5,943 from Rs 5,795.

The broker characterised Q2FY27 as mixed, with healthy revenue execution but weaker gross margin and EBITDA margin. Its positive long-term thesis rests on Hindustan Aeronautics being the primary supplier of military aircraft in India, sustained demand from indigenous defence procurement, a robust approximately Rs 1.0 trillion two-year opportunity pipeline, increasing technology capabilities and operating leverage.

Q2FY27 Financial Performance

Hindustan Aeronautics reported consolidated Q2FY27 revenue of Rs 7,613 crore, up 14.9 per cent YoY and 3.5 per cent above Prabhudas Lilladher's estimate of Rs 7,358 crore. The revenue growth was attributed to healthy execution.

Gross profit grew 8.5 per cent YoY to Rs 4,030 crore, but gross margin declined 312 basis points YoY to 52.9 per cent, against the broker's estimate of 59.0 per cent, indicating an adverse revenue mix. EBITDA rose 11.7 per cent YoY to Rs 1,740 crore but was 11.1 per cent below the broker estimate of Rs 1,957 crore. EBITDA margin contracted 65 basis points YoY to 22.8 per cent, versus the estimated 26.6 per cent, as lower gross margin was only partly offset by a 4.6 per cent YoY decline in other expenditure.

Profit before tax increased 11.3 per cent YoY to Rs 2,470 crore, aided by other income rising 11.3 per cent YoY to Rs 988 crore. Reported profit after tax increased 10.7 per cent YoY to Rs 1,839 crore. Adjusted profit after tax rose 16.0 per cent YoY to Rs 1,936 crore and exceeded the broker estimate by 5.6 per cent, helped by Rs 97 crore of profit from joint ventures compared with Rs 7 crore in Q2FY26.

H1FY27 Performance

In H1FY27, revenue increased 14.7 per cent YoY to Rs 13,128 crore, EBITDA increased 15.0 per cent to Rs 3,266 crore with a broadly flat 24.9 per cent margin, and profit after tax increased 12.6 per cent to Rs 3,417 crore.

Order Pipeline and Near-Term Execution

Management's delivery target is central to the near-term outlook. Hindustan Aeronautics had received 14 GE F404-IN20 engines by October 2026, had built around 27 LCA Mk1A airframes awaiting final testing and targeted delivery of around 10 aircraft to the Indian Air Force by March 2027.

Prabhudas Lilladher sees order prospects of around Rs 1.0 trillion over the next two years across ALH helicopters, Su-30 upgrades, Dornier aircraft and engine programmes. It notes that execution in LCH Prachand, HTT-40 and engine programmes remains on track.

The broker also highlights an estimated Rs 20,000 crore approval in principle for Light Multi Role Helicopters for the Army and Air Force. This adds to the helicopter order pipeline alongside ALH.

Long-Term Growth Opportunities

Longer-term growth opportunities cited by the broker include UAVs, AMCA, indigenous aero-engines and export initiatives across Africa, the Middle East and Southeast Asia.

The Safran agreement for the SAFHAL joint venture to develop the 3,500 to 4,000 shp Aravalli helicopter engine is viewed as a step towards indigenous IMRH and naval-variant engine capabilities. Engagements with GE and Honeywell, together with the Hatsoff Helicopter Training acquisition from CAE, are expected to strengthen capabilities.

Forecasts and Valuation

Prabhudas Lilladher reduced FY28E and FY29E sales estimates by 1.4 per cent and 0.1 per cent, and EBITDA estimates by 1.9 per cent and 0.7 per cent, while raising EPS estimates by 0.4 per cent and 1.9 per cent.

The target price is based on 35 times September 2028E earnings, reduced from 36 times March 2028E earnings after rolling forward the valuation. The stock traded at 30.0 times FY28E and 27.2 times FY29E earnings.

Key Monitorables and Risks

• Timely Tejas Mk1A deliveries.
• Supply-chain issues.