Newsletter
Hindustan Aeronautics fell more than 2% as the company’s operating profitability fell short of market expectations.
By the numbers
- Net profit up 16% YoY at ₹1,936 crore
- Revenue up 14.9% YoY at ₹7,613 crore
- EBITDA up 11.6% YoY at ₹1,739 crore
- Margin down to 22.8% from 23.5%
Why the fall: HAL’s revenue and net profit grew at a healthy pace. However, operating profit increased more slowly than revenue and missed analysts’ expectations.
In simple words, HAL sold more during the quarter but kept a slightly smaller operating profit from every ₹100 it earned.
The margin specifically fell as expenses increased faster than revenue.
HAL’s total costs rose nearly 16%, compared with a 14.9% rise in sales. The mix of products delivered during a quarter can also affect margins because different aircraft, helicopters and repair contracts offer different levels of profitability.
Higher project and production costs therefore absorbed a larger share of the company’s revenue.
Then how profit rose: other income provided additional support.
HAL earned around ₹990 crore from sources outside its main operations, up from approximately ₹889 crore last year. This includes income such as interest earned on its cash and investments.
The additional income helped net profit grow faster than operating profit.
The Tejas update: engine availability has been one of the biggest problems affecting deliveries of the Tejas Mk1A fighter aircraft.
GE Aerospace delivered three F404 engines during the quarter, taking total supplies to 10. More regular engine deliveries could allow HAL to speed up aircraft production and recognise revenue from its large Tejas order.
HAL also delivered two Tejas trainer aircraft, three HTT-40 basic trainers and four Dhruv helicopters in September.
The helicopter move: HAL has acquired the remaining 50% of HATSOFF Helicopter Training from CAE Canada.
HATSOFF provides simulator-based training for military and civilian helicopter pilots. It will now become HAL’s wholly owned subsidiary, giving the company complete control over the business and its future expansion.
Zoom out: India continues to spend more on locally manufactured fighter aircraft, helicopters and defence systems.
The company's future growth will depend on receiving engines and other important components on time, increasing aircraft deliveries and preventing costs from rising faster than revenue.
For investors, the next few quarters will show whether better Tejas execution can convert HAL’s large order pipeline into stronger revenue without placing further pressure on margins.
