HAL margin drops as expenses outpace revenue growth
Operating margin fell for a second straight quarter, while other income remained 42.28% of pre-tax profit.
Filed 12 Nov 2026, 13:30 IST · Hindustan Aeronautics Ltd (HAL)
Key takeaways
- Consolidated revenue grew 14.85% year on year, but operating margin fell 0.65 percentage points as expenses grew 15.84%.
- Sequentially, operating margin dropped 4.83 percentage points to 22.85% because expenses rose 47.27% against 38.04% revenue growth.
- Other income contributed 42.28% of pre-tax profit, while the stock fell 2.13%, more than its 1.75% median move after the past eight results.
Price around the results
Revenue growth did not prevent a sequential margin squeeze
Hindustan Aeronautics reported consolidated revenue growth of 14.85% year on year, but operating profit grew only 11.66% as expenses rose faster than revenue. The sequential picture was sharper: revenue increased 38.04%, while expenses climbed 47.27%, reducing operating margin by 4.83 percentage points to 22.85%.
Costs drove the second straight quarterly margin decline
Operating margin has now fallen for two consecutive quarters, from 36.28% in Q4FY26 to 27.68% in Q1FY27 and 22.85% in Q2FY27. Depreciation rose 14.33% year on year, while interest was unchanged at Rs 0.36 cr, so the main pressure came from operating expenses, which grew 15.84% against 14.85% revenue growth. The year-on-year margin decline was 0.65 percentage points.
Other income remained a large part of reported profit
Other income accounted for 42.28% of consolidated pre-tax profit, making reported earnings quality an important consideration alongside operating performance. The tax rate fell 0.48 percentage points year on year and 0.95 percentage points sequentially, providing a modest lift to net-profit growth relative to pre-tax profit. HAL's 22.85% operating margin was 11.34 percentage points above the 11.51% median for the 230 Industrials peers that had reported the quarter.
The market reaction was weaker than HAL's usual result-day move
The stock fell 2.13% on the results date, with volume at 3.25 times the reference level. That decline was larger than the 1.75% median absolute move across the past eight results, although the stock has risen after five of those results and fallen after three.
Q2FY27 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q2FY27 | Q1FY27 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹7,613 cr | ₹5,515 cr | +38.04% | +14.85% |
| Other income | ₹1,085 cr | ₹912 cr | +18.97% | +21.21% |
| Expenses | ₹5,874 cr | ₹3,988 cr | +47.27% | +15.84% |
| Operating profit | ₹1,739 cr | ₹1,527 cr | +13.93% | +11.66% |
| Operating margin (%) | 22.85% | 27.68% | — | — |
| Interest | ₹0 cr | ₹0 cr | +2.86% | +0.00% |
| Depreciation | ₹258 cr | ₹304 cr | -15.15% | +14.33% |
| Profit before tax | ₹2,566 cr | ₹2,134 cr | +20.23% | +15.23% |
| Tax | ₹630 cr | ₹545 cr | +15.74% | +12.99% |
| Net profit | ₹1,936 cr | ₹1,590 cr | +21.76% | +15.97% |
| EPS (₹) | ₹28.94 | ₹23.77 | +21.75% | +15.95% |
Operating margin of 22.85% compares with a Industrials sector median of 11.51% across 230 peers that have reported Q2FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -2.13% | -2.31% |
Volume on the results session was 3.25× its 20-day average.
What to watch
- Whether operating margin holds above 22.85% after two consecutive quarterly declines.
- Whether expense growth moderates from 47.27% sequentially.
- Whether other income remains close to 42.28% of pre-tax profit.