Hindustan Aeronautics Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from Hindustan Aeronautics Limited (HAL) Q3 FY22 Earnings Concall

Management Update:

• HAL stated that the company expects its yearly targets to be met going forward, both physically and financially.

Q&A Highlights:

• Umesh Rao from PhillipCapital asked about the impact of geopolitical tension on HAL’s current execution of backlog. R Madhavan CMD answered that immediately the effect of this tension is not going to be felt and HAL has sufficient inventories to take it through the next quarter. However, if the situation continues, there should be some issue regarding the spares supply from Russia.

• Umesh Rao from PhillipCapital also asked about the update on the finalization of 12 Su-30MKI Aircraft. R Madhavan CMD replied that the contract is there with the government and the government is deciding on how to place the order. HAL is assuming that it will get close soon, probably by 1Q23, however a date cannot be given.

• Umesh Rao from PhillipCapital asked about how many additional orders HAL is expecting on AL-31FP and RD33 engine platforms and timeline for delivery. R Madhavan CMD said that the company is expecting around more than 200 engines on AL-31FP and 60 engines for RD33. The value will work out somewhere between INR25,000-30,000 crores. The delivery timeline is meant for a six year period.

• Harshit Patel with Equirus asked about the execution status of the old Tejas contract. R Madhavan CMD said that in FY22, the company will be physically producing all the balance 10 aircrafts of FOC. And next year onwards, HAL will start the Trainer. The Trainer is planned over two years because the lines are to be kept continuously operational till the 83 order comes in.

• Harshit Patel with Equirus also enquired about the execution of advanced light helicopter Dhruv and how many units are left to be produced from the existing contracts. R Madhavan CMD said that the 25 unit from the Army is still pending; it’s a long way to go. The balance of Coast Guard, 20 are pending as of now, which will see HAL through next year valued at INR3,000 crores.

• Harshit Patel with Equirus asked that how many units of LCH and LUH the company has produced so far. R Madhavan CMD answered that for LCH physically HAL has produced eight of them against LOI and delivered three as of now. And the rest, HAL is waiting for the order to be placed to make deliveries. For LUH, there is no order placement, but since HAL is planning to fly the aircraft from the new facility at Tumkur in Aug., HAL is manufacturing about four of them.

• Ranjeet Kumar of Mahindra Manulife asked about the new LC order of Tejas, and the execution timeline. R Madhavan CMD replied that the schedule is from March 2024 onwards. And for the first year, HAL will produce only two, then later on eight, and then 16 per year.

• John with Aditya Birla Mutual Fund enquired about the delivery target for FY22.  R Madhavan CMD answered that the target for FY22 is 38 numbers of aircrafts, including LCA, helicopters, etc., but excluding Dornier.

• Aditya of Security Investment Management asked about the completion timeline of Phase 1 and Phase 2 of Tumkur facility.  R Madhavan CMD said that Tumkur facility, including Phase 1 and Phase 2, will be completed in March and production will start somewhere around June ’22 onwards.

• Bhavin Vithlani of SBI Mutual Fund asked that 55% of revenue which is ROH and spares, what percentage of this could be from Russian vintage aircrafts and helicopters. R Madhavan CMD replied that of the INR12,500 crores of ROH around INR4,200 crore is Russian origin.