Hindustan Aeronautics Shares Decline 4% Following Q4 Results That Missed Analyst Estimates, Profitability Concerns Expressed by Brokerages

Hindustan Aeronautics' Profit Growth Fails to Impress Investors

Shares of Hindustan Aeronautics (HAL) fell nearly 4 per cent in Friday's afternoon trade despite the company reporting a profit growth in the March quarter. Concerns around delayed Tejas Mk1A deliveries and weaker profitability weighed on investor sentiment.

HAL shares were trading at Rs 4,427.00, down Rs 181.00 or 3.93 per cent in afternoon trade as per National Stock Exchange (NSE) data.

The defence PSU reported a 5.5 per cent year-on-year rise in net profit at Rs 4,196 crore for the quarter ended March 31, compared with Rs 3,977 crore in the year-ago period. Revenue from operations rose 1.7 per cent to Rs 13,942 crore. A sharp 76.6 per cent jump in other income to around Rs 1,151 crore helped offset pressure on operating profitability.

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Analysts at Antique Stock Broking have suggested that FY27 could emerge as an inflection point for HAL, driven by a likely pick-up in Tejas Mk1A deliveries as engine supply issues ease. However, rising material costs pushed total gross expenses higher during the quarter.

JM Financial flagged margin weakness and execution concerns in its note. The brokerage stated that HAL reported Q4FY26 EBITDA at INR 50.58 billion (-4%YoY) which was 3% ahead of its estimate but 5% below consensus estimates. EBITDA margin at 36.3% missed both JM Financial's estimate of 37.3% and consensus estimate of 37.9%. EBITDA margin delivery was driven by a sharp decline in provisions at INR 1.67 billion (down 88%YoY) -just 1.2% of revenue which is the lowest in at least the last 12 quarters. Gross margin came in at 54% (flat QoQ), a sharp downturn from 63.7% in Q4FY25.

The delay in Tejas deliveries has also raised concerns. JM Financial stated that news reports indicate that a critical review meeting between the Indian Air Force (IAF) and HAL, (expected to be scheduled in end-April or early May) has been delayed. The delay is likely on account of non-submission of required progress update reports on technical and certification-related aspects. We await clarity from management on the status of technical integration and outlook on deliveries for Tejas MK1A for FY27.

Concerns around the Tejas programme have also been flagged by the Indian Air Force chief, Air Force chief Amar Preet Singh, who last year said, "So, once a timeline is given, not a single project that I can think of has been completed on time. So, this is something we must look at. Why should we promise something which cannot be achieved? While signing the contract itself, sometimes we are sure that it is not going to come up, but we just sign the contract."

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Comparison of HAL's EBITDA and EBITDA Margin

Note: EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a financial metric used to evaluate a company's profitability.