Slowing revenue growth may disrupt HAL's flight path

Investors in Hindustan Aeronautics Ltd (HAL) are upbeat, given the government’s sharp focus on defence indigenization. On Monday, the HAL stock hit a new 52-week high of ₹2,167. The company is a key supplier of India’s military aircraft.

- Dipti Sharma

However, the investor optimism comes in the backdrop of muted September quarter (Q2FY24) results. Weak execution and higher costs led to lower-than-expected profit after tax of ₹1,235.3 crore.

Costlier raw material costs and increased expenses squeezed operating margins by over 400 basis points year-on-year (y-o-y) to 21.7%. Revenue growth of 9.5% y-o-y at ₹5,636 crore lagged expectations as well. Manufacturing revenue may have grown faster than high-margin repair & overhaul (ROH) segment, said analysts.

On the bright side, HAL’s order pipeline is strong, bringing visibility on long-term revenue growth. For FY24, HAL has guided for an order inflow of almost ₹48,000 crore, which is 85% higher than in FY23.