Choice Institutional Equities's report on Hindustan Aeronautics
We believe HNAL delivered a reasonably strong operational performance in Q2FY26, even though profitability witnessed some contraction. The shortfall in EBITDA margin was primarily driven by higher provisioning expenses this quarter. Despite this, we remain confident that HNAL is well-positioned for a stronger second half in FY26, with topline acceleration expected from multiple ongoing and new programs. Operationally, HNAL’s momentum continues to strengthen – production lines across Bengaluru and the newly-commissioned Nashik facility are being ramped up. A robust order backlog of over 7.1x of FY25 revenue provides a multi-year revenue runway. The key execution constraint – GE F404 engine supply – appears to be easing, supported by resumed deliveries and the signing of a contract to supply an additional 113 F404- GE-IN20 engines. We believe this development is helping to pare down a major execution overhang and significantly de-risks HNAL’s FY27– FY28E revenue trajectory. In our assessment, Tejas Mk1A delivery schedule remains a key investor monitorable in the next few quarters.
Outlook
We maintain our BUY rating on the stock with a target price of INR 5,570, valuing the company at 35x of FY27/28E EPS.
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