'No impact on earnings until 2033': Why HAL’s AMCA miss may not affect near-term profits

Defence stock: Elara Securities in its fresh note on defence sector said Hindustan Aeronautics (HAL) absence in India's fifth generation fighter aircraft prototype development program is unlikely to impact earnings until 2033, calling it “a pause, not a full stop.” 

The research note highlighted that while HAL is reportedly not part of Advanced Medium Combat Aircraft (AMCA) prototype development, its business remains well-diversified across multiple ongoing and developmental programs. 

These include the Tejas Mk II prototype, expected in Q2FY27, Su-30 upgrades, Dornier 228, TEDBF, and CATS Warrior UCAV, alongside helicopters such as UHM, IMRH, LUH, and LCH Prachand. Elara said HAL is also pursuing new initiatives, including MRO services for Airbus, certification of civil helicopters by Q3FY27, and the development of the SJ-100 commercial aircraft with Russia.

According to Elara, the AMCA program, still at the prototype stage, was unlikely to contribute to HAL’s revenue or earnings until 2033, with the first prototype slated for 2030, orders estimated around 2032, and deliveries by CY35. 
Elara said HAL’s exclusion has been linked to its book-to-bill ratio exceeding the 3 times requirement, standing at over 8 times, effectively ending its monopoly in fighter aircraft programs.

Elara Securities maintained that while the AMCA miss is a setback, HAL’s current order book of Rs 2.5 lakh crore, backed by major contracts including LCA Tejas Mk 1A, LCH Prachand, HTT-40, LUH, Su-30 aircraft and engines, provides revenue visibility till FY32. 

It revised HAL to 'Accumulate' from 'Buy', lowering the target price to Rs 4,480 from Rs 5,680, reflecting the loss of monopoly in fighter jets, though EPS estimates remain unchanged. 

Earnings CAGR is expected at 6 per cent through FY25–28, with RoE and RoCE at 22 per cent and 23 per cent, respectively. Risks for the stock included include delays in Tejas Mk 1A deliveries and increased private-sector participation in helicopter programs.