Hindustan Aeronautics (HNAL IN) – Q4FY26 Result Update – Soft Q4, growth contingent on LCA deliveries – BUY

Hindustan Aeronautics (HAL) reported a soft quarterly performance with revenue grew by ~2% YoY with EBITDA margin contracted by 237bps YoY to 36.3%. However, management guided for ~10–12% revenue growth in FY27, driven by ramp-up in manufacturing revenues led by LCA Mk1A and HTT-40 deliveries, while EBITDA margins are expected to remain stable at ~30-31% supported by escalation clauses and pre-procured inventory. HAL expects robust order inflows of ~Rs900bn over the next two years, supported by large opportunities across ALH helicopters, Su-30 upgrades, Dornier aircraft and engine manufacturing programs. The LCA Mk1A program is witnessing improving execution visibility with GE engine supplies gradually normalising and deliveries expected to commence from Sep’26, while HAL targets delivery of ~15-20 aircraft in FY27 supported by three operational production lines and significant inventory already built. Execution across LCH Prachand, HTT-40 and engine programs also remains on track, while long-term opportunities in UAVs, AMCA and indigenous aero-engine programs continue to strengthen HAL’s strategic positioning in India’s defence ecosystem. Additionally, HAL plans cumulative investments of ~Rs120bn by 2030 towards capacity expansion, aero-engine infrastructure and next-generation defence platforms, which should support long-term growth. The stock is currently trading at a P/E of 31.7x/28.3x on FY27/28E earnings. We maintain ‘Buy’ rating valuing the stock at a PE of 35x Mar’28E (same as earlier) arriving at a TP of Rs5,423 (Rs5,338 earlier).