Hindustan Aeronautics Limited — Q4 FY23 earnings call

Call held 17 May 2023

Management summary

HAL posted a strong FY23 with record revenue of Rs 26,900 crores and PBT growth of 24%, exceeding its own guidance. The year was marked by ROH-driven revenue (manufacturing subdued) and significant non-operating income from tax refunds and interest. Management provided a clear growth trajectory: 9% in FY23-24, double-digit from FY25, stabilizing at 14-15%. The Rs 48,000 crore manufacturing order pipeline and Rs 82,000 crore order book provide strong visibility.

Highlights

  • Record revenue of Rs 26,900 crores, up 9.37% YoY vs Rs 24,600 crores; exceeded 8% guidance

  • PBT grew 24% to ~Rs 6,500 crores from Rs 5,231 crores; PAT grew 14% (10% operating PAT growth)

  • EBITDA margin at 31% vs 25-26% historical; driven by ROH mix and Rs 600 crore HTT-40 amortization

  • Order book maintained at ~Rs 82,000 crores; Rs 26,000 crores liquidated and Rs 26,000 crores accreted

  • Interest income Rs 900+ crores from surplus cash; additional Rs 560 crores IT refund interest

  • Income tax dispute settled: Rs 2,451 crores refund + Rs 830 crores interest over 2 years (FY08-FY16)

  • Rs 48,000 crores manufacturing orders expected in FY24 including AL-31FP Rs 26,000 crores

  • Double-digit revenue growth guided from FY25; 12-13% then stabilizing at 14-15%

Key financials

  1. Revenue ₹26,900 Cr +9.4%YoY
  2. PBT ₹6,500 Cr +24%YoY
  3. PAT Growth 14% +14%YoY
  4. EBITDA Margin 31%
  5. Order Book ₹82,000 Cr
  6. Interest Income ₹900 Cr +125%YoY

What they filed

Q1 FY27: revenue up 14.4%, net profit up 14.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue5,976 6,957 13,700 4,819 6,629 +11%7,699 +11%13,942 +2%5,515 +14%
EBITDA1,640 1,683 5,295 1,282 1,558 −5%1,871 +11%5,059 −4%1,527 +19%
Net profit1,510 1,440 3,977 1,384 1,669 +11%1,867 +30%4,196 +6%1,590 +15%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Revenue

  • Revenue Growth Trajectory Revenue · FY25 onwards · High confidence Double-digit from FY25, 12-13% then 14-15%

    From 8% for FY23-24 today

    from FY '25, it will be a double-digit growth. And after that, we expect the growth at around 12% to 13% and then stabilize at around 14% to 15%

    — C.B. Ananthakrishnan

Margins

  • EBITDA Margin Margins · Sustainable · High confidence 26-27%

    From 31% achieved in FY23 today

    may not be sustainable at 31%. We will settle down at 26%, 27%

    — C.B. Ananthakrishnan

  • Operating Profit Margin Margins · Sustainable · High confidence 17-19%
    operating profit in today's scenario is somewhere around 17% to 18%...maybe marginally improving year-on-year

    — C.B. Ananthakrishnan

Order Book

  • Manufacturing Order Inflow Order Book · FY24 · High confidence Rs 48,000 crores
    estimated order value of almost INR48,000 crores to get concluded in the coming financial year

    — C.B. Ananthakrishnan

ROH

  • ROH Growth ROH · From FY24 · High confidence 5-6%

    Previously 10-12% → 5-6%

    from the next year onwards, the growth in the repair and overhaul will be at around 5% to 6%

    — C.B. Ananthakrishnan

Deliveries

  • LCA Mark 1A Delivery Schedule Deliveries · FY24 onwards · High confidence 3 in FY24, then 16/year peak
    1 fighter and 2 trainer, total 3 aircraft during the current financial year...16 numbers starting from '24-'25 onwards

    — C.B. Ananthakrishnan

  • HTT-40 Delivery Schedule Deliveries · FY26 onwards · High confidence Starting Sep 2025, peak 20/year

    From Oct 2025 today

    start with the 12 and then 16 and then 20

    — C.B. Ananthakrishnan

Order Pipeline

  • AON Approved Orders Order Pipeline · 2-3 years · High confidence Rs 36,000 crores
    AON that is the acceptance of necessity has been approved...is around INR36,000 crores

    — C.B. Ananthakrishnan

  • AON Pending Pipeline Order Pipeline · 2-5 years · Medium confidence Rs 65,000 crores
    AON's which has not been approved also for which visibility is there is another INR65,000 crores

    — C.B. Ananthakrishnan

Risks & concerns

  • Manufacturing revenue still subdued; dependent on new orders materializing

    medium

    Only 7 ALH, 2 LCA, 8 LCH, 2 Dornier delivered in FY23. Manufacturing pickup dependent on LCA Mark 1A and new contracts

    Both acknowledged

  • ALH fleet partially grounded after 3 accidents

    medium

    Army grounded ALH; Air Force still flying. Cost of control rod replacement Rs 150-200 crores. Management says no design issue

    Both downplayed

  • Export breakthrough still pending

    medium

    Active leads with Philippines, Argentina but no confirmed order. Expected within 1 year

    Both acknowledged

  • Russian supply chain concerns persist

    medium

    Some delays but supplies getting normalized. Payments sorted through rupee route. Fleet serviceability maintained

    Analyst downplayed

  • EBITDA margin of 31% unsustainable

    low

    Elevated by HTT-40 amortization (Rs 600 crores), higher ROH mix. Will normalize to 26-27%

    Management acknowledged

Areas of evasion (2)

  • Development order specifics
  • Exact manufacturing vs ROH margin split

Q&A highlights

5 direct
LCA Mark 1A Delivery Timeline Direct
working on a very tight schedule...even if there are going to be some sort of delays, it may not be very significant

Acknowledges tight schedule but confident on delivery; third line being set up in Nashik

Asked by Amit Dixit (ICICI Securities)

ALH Accidents Impact Direct
all these accidents are not due to similar issues...accident rate 7.3-7.4 per lakh hours is considered very good

3 back-to-back ALH accidents; management defends aircraft safety record; cost of fix Rs 150-200 crores

Asked by Aditya (Securities Investment Management)

Revenue Growth Path Direct
from FY '25, double-digit growth...after that 12-13% and then stabilize at 14-15%

Clear multi-year growth trajectory articulated for the first time

Asked by Mahesh Bendre (LIC MF)

Order Pipeline Breakdown Direct
AON approved Rs 36,000 crores...AON pending Rs 65,000 crores...2-5 years

Detailed pipeline visibility: Rs 1 lakh crores total across AON approved and pending

Asked by Abhineet (Emkay Global)

GE F414 Engine TOT Direct
we are not having any problem with the TOT with the GE. We'll be manufacturing the engine at HAL

Critical for LCA Mark 2 program; confirms no TOT issues with GE

Asked by Umesh Raut (Philip Capital)

1 min read 5 chapters

Detailed narrative

Record Revenue Despite Manufacturing Lull

HAL achieved record revenue of Rs 26,900 crores (+9.37% YoY) driven by ROH/spares despite limited manufacturing deliveries (25 platforms total). ROH contributed ~Rs 18,800 crores. PBT surged 24% to Rs 6,500 crores aided by Rs 900 crores interest income and Rs 560 crores IT refund interest.

Rs 48,000 Crore Manufacturing Pipeline for FY24

Expected orders: AL-31FP 240 engines (Rs 26,000 crores), RD-33 80 engines (Rs 4,500 crores), 25 ALH Dhruv (Rs 3,500 crores), 12 LUH (Rs 2,500 crores), 12 additional Su-30 (Rs 12,000 crores). All in advanced negotiation stages.

Multi-Year Growth Trajectory Articulated

Management laid out clear growth path: FY23 achieved 9.37% (exceeded 8% guidance), FY24 guided ~9%, FY25 double-digit (10-11%), then 12-13%, stabilizing at 14-15%. Last 4-year CAGR was 7.7%. Manufacturing pickup from FY25 with LCA Mark 1A deliveries is the key catalyst.

Income Tax Settlement and Cash Position

Long-pending IT disputes from FY08 to FY16 settled with Rs 2,451 crores refund and Rs 830 crores interest over 2 years. No further pending disputes. Cash balance healthy for working capital and proactive procurement.

Order Pipeline Visibility of Rs 1 Lakh Crores+

Beyond Rs 48,000 crores near-term orders: AON approved Rs 36,000 crores (Coast Guard ALH 9, UHM 60, UHM PBL Rs 13,000 crores). AON pending Rs 65,000 crores (LCH 145, LUH 175, HTT-40 36, Dornier upgrades). Total pipeline exceeds Rs 1 lakh crores over 2-5 years.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Capital Goods earnings calls