Thread by @ajitsuryak

HFCL - Bubble or 5G Opportunity - Thread⚡️

Leading manufacturer of optical fiber cables, optical transport, power electronics, and broadband equipment for the telecommunication industry

@Atulsingh_asan @caniravkaria @AvadhMaheshwar2  @saketreddy @Jitendra_stock  @AnishA_Moonka

#HFCL (2/n)

Wide Industries Served: Telecom, Defence, Railways, Security and Surveillance

8 Year Revenue CAGR: 25%

8 Year PAT CAGR: 20%

FY21 ROCE: 19.80%

D/E: 0.48x

R&D facilities at Bengaluru and Gurugram

Key Customers: Jio, BSNL, Tata, Airtel

Exporting to 30+ countries

#HFCL (3/n)
Telecom Segment:

Co looking to tap the ₹1-lakh crore 5G market opportunity in India, and exports to West Asia, South-East Asia and Europe

One of the largest telecom project service provider for Reliance Jio and is currently engaged in rolling out of 4G OFC Network

#HFCL (4/n)

FTTX Network: Deployed a Fiber-to-home network connecting approx. 3.5mn home customers in 207 cities

Intending to be the radio solution provider for the roll-out of 5G networks, with pre-validated software for operator-specific deployments and for 0 touch operations

#HFCL (5/n)
Planning to build 5G RAN products such as Macro RU, 5G Indoor Small Cell and 5G Outdoor Small Cell and 5G Transport products such as Fronthaul Gateway, Cell Site Router, and Aggregation Routers

Will be participating in the govt’s PLI schemes for the telecom sector.

#HFCL(6/n)
Optic Fibre Segment:

HFCL is planning to expand its fiber capacity by 25% to 10 million fiber km per annum (fkm/pa) from 8 million fkm/pa at its Hyderabad plant by the end of this fiscal year.

Also ramping up OFC capacity by 22% to 22.5 million fkm/pa by Dec'21

#HFCL(7/n)
The company’s FTTH production capacity would also be hiked by 20% to 7.2-lakh cable km/pa by Sep'21

FTTH connections estimated to grow from the current 4mn to nearly 50mn by 2024

Continued Government investments in high-capacity networks to aid mass scale OFC demand

#HFCL(8/n)
Defence

HFCL manufactures Electro-Optical Devices and Electronic Fuses for all types of artillery ammunition

It is the only Indian company to have developed the electronic fuses for artillery ammunition with its own IPRs; participated in a bid for supply of 5Mn fuses

#HFCL(9/n)

India's defense electronics market is expected to grow to $70 billion in the next 5 years.

Govt. target to reduce imports from 65% to 30% to provide massive opportunities for Indian manufacturers

Defence Min. has set a target of 70% self-reliance in weaponry by 2027

#HFCL(10/n)
Railway:
Currently implementing telecom networks for three greenfield domestic railway freight corridor projects awarded by L&T and Alstom

Also executing two overseas projects of setting up telecommunication systems for Mauritius Metro and Dhaka Metro Rail

#HFCL(11/n)
Implementing telecommunications systems for the recently won contract of Kanpur and Agra-Metro projects

Railways have announced major plans to overhaul the signaling system by spending about Rs 850 bn over the next 5-6 years & has invited private sector participation

#HFCL(12/n)
Security & Surveillance Segment

HFCL provides customized and diversified solutions spanning across hardware and software, in line with “MAKE IN INDIA” initiative

Focused on Border and Perimeter Security, Smart City Solutions, City Surveillance, Traffic Enforcement

#HFCL(13/n)
Projects under execution:

Defence-CCTV Surveillance, access system, Fire detection at 300+ location of Indian Army

RailTel Corp. of India Ltd. 25,000 VMS at ~600 Railway locations.

>Increased push from governments and law enforcement agencies continues to drive..

#HFCL(14/n)
..growth for surveillance infrastructure

Perimeter intrusion detection & prevention systems market is estimated to reach ~USD 339 million by 2023, and grow at 10.58% CAGR

Fresh allocation of ₹2,919 crore under Nirbhaya Fund for Safe Cities program.

#HFCL(15/n)
FY21 Performance and Key Highlights:

Total Income INR 44,591 Mn - 15.5 % YoY
EBITDA INR 5,857 Mn - 13.5 % YoY
PAT INR 2,463 Mn - 3.8 % YoY
Diluted EPS 1.87 INR - 6.3 % YoY

20% of the Promoters Holding was released from pledge

#HFCL(16/n)
>Established a new 5G business unit to develop a rich portfolio of next-generation 5G compatible products & services

>Launched and delivered 1.5 lakh units’ shipment of Wi-Fi products within the first year of commencement of production

#HFCL(17/n)

HFCL said it will be investing nearly Rs 125 crore for R&D activities.

HTL Limited has diversified into wiring interconnect solutions to cater to Aerospace & Defense, Automotive, and Industrial markets

Set up a model PM-Wani Village in Baslambi (Haryana).

#HFCL (18/n)
Threats:
Slower than anticipated realization of the outstanding debtors impacting the liquidity profile of the company

The lethargy of government to timely execute & implement its schemes

Promoter Issues: Jio Listing Controversy, K-10 Stocks, Pledged 44.72%.

#HFCL (19/n)
Way Forward:
Only 25% of sites in India are fiberized, a number that needs to go up to 80-85% to support 5G and its enabling technologies IoT, M2M.

Nearly 70% of India’s towers will need to be fiberized by 2022 from the current levels of sub-25% requiring..

#HFCL (20/n)
an estimated 600,000 fKm, at an investment of $8 billion

India's focus on reducing imports and Atmanirbhar Bharat - PLI scheme allocated INR12,000 Cr for Telecom equipment manufacturers with FY20 as the base year.

All the above are growth triggers in HFCL's case.

#HFCL (21/n)
Source: Investor Presentation, Research and Credit Rating Reports, Screener, wiseinvestmentpicks blog and
thehindubusinessline.com/news/national/….