Supply delay drags Hindustan Aeronautics's near-term growth prospects
Subscribe to enjoy similar stories. Investors in the Hindustan Aeronautics Ltd (HAL) stock are jittery. Shares of the public sector aerospace and defence company have declined nearly 30% from their 52-week high of ₹5,674 apiece seen on 9 July and are currently trading at ₹4,075.
The September quarter (Q2FY25) earnings of HAL had some positives such as a robust order book. However, these have not allayed investors’ concerns about supply chain issues delaying the delivery of the much-awaited Tejas Mk-1A fighter aircraft. The state-owned company manufactures aircraft and helicopters, including engines, with the Indian Air Force as its major customer.
HAL delivered the first AL-31FP Aero Q Engine under the 240-engine contract for Su30MKI aircraft in the second quarter of FY25. It has secured an order valued at around ₹26,000 crore for 240 AL 31-FP engines to power Sukhoi Su-30 fleet, with deliveries scheduled over an eight-year period. With that, HAL has a strong medium-term revenue visibility with an estimated order book of ₹1.1 trillion, up 10% year-on-year and 3.5 times trailing 12 months' sales.
This should help the company meet its guidance of order inflow of ₹47,000 crore in FY25. Further, the management expects revenue growth of 15-18% between FY25 and FY28, with repair and overhaul (ROH) services growing at 9-10%. In Q2FY25, consolidated revenue and Ebitda growth were moderate at 6% and 7% year-on-year respectively, while net profit grew sharply by 20% aided by lower depreciation and higher other income.
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