Farnborough Air Show: Ready for Rate Ramps and Readying for Next-Gen

Research evidence excerpt

Farnborough Air Show: Ready for Rate Ramps and Readying for Next-Gen

S&PAssets Primed for Rate Ramps w/o Incremental Capital. HXL's asset base is prepared to meet .

Source: FactSet, Jefferies estimates

incremental OEM rate requirements w/ capex to remain <$100MM/yr moving fwd, barring a

significant franchise win as HXL delivered $2.4BB of sales at peak vs $2.05BB at the midpt of

the '26E guide. Mgmt is working more closely with customers & suppliers to triangulate into best-

estimated build rates for inventory planning & hiring purposes, w/ the target to hire ~400 this year

(200 in Q1). There are incremental costs from restarting production lines that were mothballed

along w/ general labor variances as new hires take ~6 mos to become efficient & longer to be

considered proficient. Broadly, mgmt expects there is ~200 bps of inflation to overcome vs peak

18% margins at a similar peak sales base. This includes median pay of ~$87K as of 2025, up LDD

from pre-pandemic, while avg tenure has been reduced. Mgmt is focused on security & availability

of supply, working to identify additional sources where possible & hedging acrylonitrile over eight

quarters to smooth price movements of oil-based products.

Next-Gen Composites R&D Up to 3.5% of Sales. Mgmt continues to invest in composite material

products to position for next-gen aircraft content, w/ the expectation for a growing share of

composite content (potential combo of prepregs and Liquid Composite Moldings) relative to current

narrowbodies (~15% of MAX/neo vs 50%+ A350/787), although the degree of the step-up will

be determined in time. The technical sales process at HXL includes the R&D team put in front

of customers to discuss technologies & use cases, including for technologies with a longer time