Q4 Results: HAL Extends Decline After Results as Margin Pressure, Execution Concerns Weigh

Mumbai, May 15:Shares of Hindustan Aeronautics Ltd (HAL) extended losses on Friday, falling more than 4% after the defence PSU reported its March quarter earnings, as investors focused on margin compression and execution concerns despite a rise in profit and revenue.

The company reported a 5.5% year-on-year increase in consolidated net profit to around Rs 4,196 crore for the fourth quarter, while revenue rose nearly 2% to about Rs 13,942 crore.

To be sure, the growth in profit was inflated by other income which surged 76.6% to around Rs 1,151 crore. The other income effect on the bottomline led to the stock edging down yesterday as investors seemed less than impressed.

Today the stock extended its decline as brokers pointed out EBITDA marginsas lower than expected, disappointing investors and triggering selling pressure.

Concerns largely centred around slowing execution momentum and softer operational profitability.

At the time of writing, the stock was trading four percent lower at Rs 4,432. Source: NSE

Global brokerage Goldman Sachs retained its “Neutral” rating on the stock and cut its target price to Rs 5,225. The brokerage flagged weak execution trends, lower manufacturing activity and margin pressure, while noting that deliveries of the Tejas Mk-1A fighter aircraft remain a key trigger for the company going forward.

In contrast, Nomura maintained its “Buy” rating with a target price of Rs 5,954, citing HAL’s strong order visibility and long-term growth prospects in India’s defence manufacturing sector. The brokerage highlighted the company’s massive order backlog of nearly Rs 2.54 lakh crore, which provides multi-year revenue visibility.

The market reaction reflected rising investor expectations as the decline in operating margins and concerns around delivery timelines weighed on sentiment.

The company’s order pipeline continues to remain robust, supported by large domestic defence contracts including orders for Light Combat Aircraft (LCA) Mk1A jets, helicopters and engine platforms. However, timely execution remains critical, particularly amid supply-chain challenges and delays in engine deliveries from global suppliers.

Despite the near-term pressure, brokerages remain constructive on the broader defence sector, citing rising government spending, import substitution opportunities and strong domestic manufacturing push under India’s defence indigenisation programme.

Source:

• https://www.nseindia.com/get-quote/equity/HAL/Hindustan-Aeronautics-Limited