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    Hind.Aeronautics

    HALGood
    Capital Goods·16 May 2025
    Management Summary

    FY25 was a year of challenges (GE engine supply issues, ALH fleet grounding) and strategic wins (Rs 1.02 lakh crore new manufacturing orders). Revenue grew only 2% reported but 7.25% adjusted for prior year one-offs. The order book nearly doubled to Rs 1,89,300 crores. New CMD D.K. Sunil provided clear guidance on LCA Mark 2 timeline (first flight 2026, certification 2029, production 2030-31) and helicopter capacity (30 LCH/year). Interest income grew to Rs 2,566 crores reflecting massive cash position.

    Highlights

    8

    • Revenue at Rs 30,105 crores (+7% YoY adjusted, +2% reported due to Rs 1,502 crore prior year one-off); PBT Rs 10,820 crores (35% of revenue)

    • Order book surged to Rs 1,89,300 crores from Rs 94,127 crores; Rs 1,02,337 crores new manufacturing orders won

    • Major orders: 156 LCH Prachand (Rs 62,777 crores), 240 AL-31FP engines (Rs 25,500 crores), 12 Sukhoi-30 (Rs 13,454 crores)

    • GE engine supply chain resolved - first engine delivered April 2025; 12 LCA deliveries expected in CY2025

    • Manufacturing only 23% of revenue; ROH/spares 70%; inventory days rose to 263 from 159 due to WIP buildup

    • Maharatna status achieved Oct 2024 - first defence PSU

    • Revenue growth guidance 8-10% for FY26; possible double-digit from FY27

    • Operating EBITDA ~31%; with interest income ~38-39%

    Concerns

    2

    • GE engine supply limited to 12 in CY2025 vs 16/year contractual rate

    • ALH fleet partially grounded - Navy/Coast Guard variant

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹30,105 Cr+7.2%YoY
    2. 02PBT₹10,820 Cr
    3. 03PBT Margin35%
    4. 04Order Book₹1.89L Cr+101%YoY
    5. 05Interest Income₹2,566 Cr+35%YoY

    Guidance & targets

    13
    CategoryTargetPriority
    Revenue
    Revenue Growth FY26
    8-10%
    		High
    Margins
    Operating EBITDA Margin
    30-31%
    		High
    Margins
    EBITDA with Interest Income
    38-39%
    		High
    Margins
    Operating Profit to Revenue
    27%
    		High
    Deliveries
    LCA Mark 1A Deliveries CY2025
    12 aircraft
    		High
    Deliveries
    LCA Capacity Ramp to 24
    24 aircraft/year by FY27
    		High
    Deliveries
    LCA Capacity to 30 (with private sector)
    30 aircraft/year by FY28
    		Medium
    Deliveries
    LCH Prachand Delivery Schedule
    30/year, starting FY28, over 5.5-6 years
    		High
    Engines
    AL-31FP Delivery Rate
    30 engines/year over 8 years
    		High
    Development
    LCA Mark 2 Timeline
    First flight 2026, certification 2029, production 2030-31
    		Medium
    Order Pipeline
    Additional Orders Expected
    ~Rs 1 lakh crores
    		High
    Order Pipeline
    Su-30 Upgrade Program
    ~Rs 60,000 crores for 84 aircraft
    		Medium
    Capex
    5-Year CAPEX Plan
    Rs 14,000-15,000 crores
    		High

    Risks & concerns

    8
    RiskSeverity

    GE engine supply limited to 12 in CY2025 vs 16/year contractual rate

    GE supply chain issues resolved but only 12 engines confirmed for CY2025. Full ramp to contracted rate uncertain. LCA delivery backlog building. — Both acknowledged

    high

    ALH fleet partially grounded - Navy/Coast Guard variant

    Coast Guard ALH accident led to Navy/Coast Guard fleet grounding. Army/Air Force cleared. Resolution expected July 2025 after instrumented flight tests. — Both acknowledged

    high

    Revenue growth guidance conservative at 8-10% despite massive order book

    Order book >6x revenue but growth guided at only 8-10%. Capacity constraints and delivery timelines limit faster execution. — Analyst acknowledged

    medium

    Inventory days ballooned to 263 from 159

    Management says WIP buildup essential for 18-36 month manufacturing cycles. But significant working capital locked up. — Analyst downplayed

    medium

    LUH program facing design/software setbacks

    8 aircraft built but flight control software issues unresolved. 12-unit order still pending despite years of delays. — Both acknowledged

    medium

    Manufacturing only 23% of revenue despite large order book

    Only 14-15 platforms delivered in FY25. Ramp-up dependent on GE engines and clearing supply chain bottlenecks. — Analyst acknowledged

    medium

    Provision of Rs 804 crores for Sukhoi accident during ROH

    Sukhoi damaged during repair; Rs 804 crore provision made. Discussions with IAF for cost recovery ongoing. — Management acknowledged

    medium

    Areas of Evasion(1)

    • Exact delivery numbers for FY26 MoU target

    Q&A highlights

    6

    “General Electric has been able to solve their supply chain issues. And the first engine was delivered in April...GE has promised a supply of 12 engines in this calendar year”

    Critical bottleneck resolved; 12 LCA deliveries now possible in CY2025

    asked by Umesh Raut (Nomura)

    2 min read6 chapters

    Detailed Narrative

    01

    Order Book Doubles But Execution Challenges Persist

    Order book nearly doubled to Rs 1,89,300 crores with Rs 1,02,337 crores new manufacturing orders (156 LCH Prachand Rs 62,777 crores being the largest single order). However, actual platform deliveries dropped to ~14-15 units due to GE engine supply issues and ALH grounding. Revenue grew only 2% reported (7.25% adjusted for prior year one-off📎s).

    02

    GE Engine Supply Chain Resolution

    GE overcame COVID-era supply chain issues with sub-vendors re-certifying. First engine delivered April 2025, fitted and tested successfully. GE committed to 12 engines in CY2025. Management expects ~2 engines/month going forward⏳. Third LCA line at Nashik ready to roll out first aircraft in coming months. Capacity target: 24 by FY27, 30 by FY28 with private sector partners (L&T wings, VEM center fuselage, Alpha Tocol rear fuselage, Tata TASL fin/intake).

    03

    LCH Prachand - Flagship Order

    156 LCH Prachand order (90 Army, 66 IAF) worth Rs 62,777 crores is the largest single order. First batch delivery in 36 months (FY28). Production rate of 30/year over 5.5-6 years. Mistral missile firing successfully conducted. Bangalore and Tumkuru facilities to handle production.

    04

    Future Growth Catalysts

    Rs 1 lakh crore additional pipeline includes 97 LCA Mark 1A, 143 ALH, 10 Dornier, 40 Dornier upgrades. Su-30 upgrade program worth Rs 60,000 crores (84 aircraft) with D&D approval expected in 6 months. LCA Mark 2 first flight 2026, certification 2029, production 2030-31. CATS Warrior UCAV under R&D.

    05

    Profitability and Cost Management

    PBT at Rs 10,820 crores (35% of revenue) driven by operating efficiency (27% operating profit) and Rs 2,566 crores interest income. Rs 804 crore provision for Sukhoi accident during ROH. Maharashtra sales tax dispute settled at Rs 2,471 crores vs Rs 10,079 crore demand, fully reimbursed by IAF. Operating EBITDA guided at 30-31%, total EBITDA 38-39%.

    06

    New Management, Consistent Strategy

    New CMD D.K. Sunil (first interaction with investors) alongside new CFO Barenya Senapati. Strategy unchanged: capacity building (Rs 14-15K cr CAPEX over 5 years), capability building (R&D, indigenization), and proactive procurement. Airbus C-check MRO facility at Nashik progressing with Indigo as initial customer. Revenue expected from FY27.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.