Target: ₹5,590
CMP: ₹4,779.30
Hindustan Aeronautics (HNAL IN) revenue (adjusted) rose 21 per cent y-o-y to ₹14,220 crore in Q4FY24, 7 per cent ahead of our estimates. Repair & overhaul (ROH) revenue may have grown faster than manufacturing in Q4. FY24 revenue stood at ₹29,830 crore, up 14 per cent.
Growth was driven by deliveries of multiple platforms -five light combat aircraft (LCA) trainer variant, six advanced light helicopters (ALH), 15 RD-33 engines and exports of two Dornier 228 aircraft to Guyana. Developmental revenue declined 44 per cent y-o-y to ₹1,500 crore in FY24. Management expects revenue to grow 13 per cent in FY25, led by 15-18 per cent growth in manufacturing revenue (aided by LCA Tejas Mk-1A deliveries - 16 targeted) while ROH could grow by 8-9 per cent on a consistent basis.
We revise to Buy from Accumulate, with a higher TP of ₹5,590 from ₹4,100. Our revised TP is driven by expectations from a new stream of the exports business, surge in inflows of ₹1.6 lakh crore, rising margin, and sustained double-digit earnings growth. We believe the rising share of indigenization along with unexplored exports opportunity in the aircraft & helicopter industry warrant a rerating.
Key risks to our call include lower spend in the defence capital budget, less domestic procurement allocation, increased competition from the private sector, and delay in execution.