Thread by @LnprCapital

HBL Power Systems Ltd.

MCap : ₹ 4,215 Cr.

HBL Power Systems is the pioneer in the design, development and manufacture of specialized batteries and DC systems in India. It has more than 30 years of experience in the field of specialized batteries and DC power systems. https://t.co/M5v4K42w7ytwitter.com/i/web/status/1…

The company is the result of a merger between Hyderabad Batteries (1977) and SABNIFE Power Systems (1986). The company has its headquarters in Hyderabad, India with factories and sales offices in various parts of the country. HBL also has offices, distributors and agents all over

the globe to cater to its ever-growing export business.

HBL is committed to improving global competitiveness by sharing knowledge, drive for innovation, growth, and investments in internationally benchmarked technology and niche products.

The company’s aim is to organize India''s engineering talent into a globally competitive business, whether in manufacturing or in service.

INVESTMENT THESIS -

~ Diversified revenue base across multiple user industries
~ Comfortable and diversified order book, strong clientele

~ Strong Order Book & Inflows
~ Second Largest Manufacturer
~ Long proven track record of operations
CAPEX

• Diversified revenue base across multiple user industries :

HBL has established itself as one of the leading players engaged in development and manufacturing of

batteries, electronics and engineered products based on in-house developed technologies. The company’s product portfolio mainly caters to niche sectors namely telecom, UPS, solar, defence and railways in India. The Battery vertical is one of the major revenues spinners for the

company followed by Electronics segment. The company is one of the largest manufacturers of Ni-Cad batteries which has diverse industrial applications. HBL has also started focussing on electronic and engineering products for the defence and railways.

• Comfortable and diversified order book, strong clientele :

The company had an order book of Rs. 594 crore thereby providing a medium-term revenue visibility. The outstanding order book of the company is diversified with 38% for Silver Zinc, submarine and Lithium batteries

followed by 24% of the orders is for Nickle Cadmium and Sintered batteries, 19% for lead batteries (Valve Regulated Lead Acid Batteries), 8% for Train Collision Avoidance System (TCAS) and Train Management System (TMS) for Railways and remaining for Defence electronics segment,

Power electronics, etc. The company also has contracts from Railways, Indian Navy and the company also expects to receive tenders in the railways segment in the present financial year.
HBL has maintained a healthy relationship with its clients over the years.

The company has been receiving repeat orders from the existing clientele. Indus Towers Ltd, Vertiv Energy Private Limited, and Cummins India Limited being in the top 10 largest clients over the years contributed around 36% of net sales in FY22.

•Strong Order Book & Inflows :

Company has an order book of nearly Rs.1,400 crs. thereby providing a strong visibility of revenue growth for the immediate future (effective from H2 this year itself). The outstanding order book of the company is diversified with 38% for

Silver Zinc, submarine and Lithium batteries followed by 24% of the orders is for Nickel Cadmium and Sintered batteries, 19% for lead batteries (Valve Regulated Lead Acid Batteries), 8% for Train Collision Avoidance System (TCAS) and Train Management System (TMS) for Railways

and remaining for Defence electronics segment, Power electronics etc.

The company as the lead member of a consortium with Siemens, signed the first contract under Mission Raftar project, with Eastern Railway for deployment of Kavach (TCAS - Train Collision Avoidance System)

over 260 km of track and 120 locomotives, from Howrah to Pradhankhanta. The contract price is Rs.286.69 crs. including taxes of which HBL's work share is Rs. 205.88 crs; the contract is scheduled to be completed in 700 days. Also, Integral Coach Factory is manufacturing the

Vande Bharat train sets, designed to run at 160 kmph. HBL received a purchase order from ICF for the supply of 46 sets of Kavach, to be installed at the time of manufacture of the train sets, at a total price of Rs.31.66 crs. including taxes. Deliveries were expected to begin in

Nov 2022 and are scheduled to be completed by July 2023.

• Second Largest Manufacturer :

Ni-Cd technology is the most resistant of mainstream technologies to sudden death. The rigid, steel structure of Ni-Cd supports sintered/PBE electrodes. The company is the world's

second largest manufacturer of nickel-cadmium batteries. India is expected to have a total planned pipeline of 23,839 kms. by 2026. This will enhance the demand for Ni-Cd batteries.

• Long proven track record of operations :

The company has been promoted by Dr A. J. Prasad - Chairman and Managing Director in 1986. Dr. Prasad has, over a period, built substantial experience in the line of business in which the company operates and has undertaken extensive

research in battery and related segments. He has been associated with the industry for over three decades. He along with Ms. Kavita Prasad (daughter)- whole time Director and a team of experienced professionals, look after the day-to-day operations of the company.

The company caters to the requirement of core sectors like telecom, railways, power, defense, etc.

• CAPEX :

The company is planning to set up its own manufacturing facility at Mahabubnagar, Hyderabad to manufacture Lithium Ion cells and Electric DriveTrain (EDT). The total

cost for proposed CAPEX is expected to be around Rs. 110 crs. to be completed in two phases. The capex is proposed to be funded through term debt of Rs.80 crore and balance through internal accruals. The Phase I of the project is envisaged to achieve COD by Q3FY23 and Phase II

work will start after successful completion of Phase I.

BUSINESS VERTICAL -

~ Electronics
~ Defence
~ Batteries

• ELECTRONICS : This vertical is expected to emerge as the key business and profitability driver over the coming years. In 2021, Indian Railways announced the

adoption of TCAS as India’s national Automatic Train Protection (ATP) System & re-christened it as Kavach. Also announced their plan to deploy Kavach over 34,368 km of track, covering high density & highly utilised routes, targeting the completion of this ambitious plan by 2026.

With this intent, the Indian Railways has issued 10 tenders for the deployment of Kavach on the Delhi-Howrah and Delhi-Mumbai routes, its two flagship routes, under Mission Raftar. We have participated in the tenders for Delhi-Howrah route, as the Lead Member of the HBL-Siemens

Consortium. The Eastern Railway has awarded us the project for the deployment of Kavach on 120 locomotives and over 260 km of track from Howrah towards Delhi. Additionally, as the lead member of a consortium with Shivakriti International, The company have also been declared as

the lowest bidder in two tenders in West Central Railway and Western Railway, on the Delhi-Mumbai route. Contracts for these tenders are expected to be awarded shortly. other major opportunity for Kavach (TCAS) is Vande Bharat Trains (Train 18), another flagship project of the

Indian Railways. The Railways has decided to equip all new Vande Bharat Trains being produced with TCAS on board in the railway factory itself.

HBL has received an order for 46 TCAS systems to be installed on new Vande Bharat Trains being produced at ICF for which deliveries

are scheduled in the second half of FY23. FY22 was, then, a landmark year of building and putting the pieces in place for the next leap forward.

The company intensified focus on completing TCAS and TMS projects aided by the newly deployed ERP-enabled project management system

and leveraging the insights gained through initial implementations. This will be followed by offering the entire prototype for approval in the next 12-18 months.

Recent Developments in Odisha

•The unfortunate Odisha railway accident has underlined the importance of TCAS

(train collision avoidance system) or "Kavach"... CAG report has highlighted many loopholes in signaling systems that are causing derailments from 2017-21.

•Hbl Power System along with Medha Servo Drives Pvt Ltd & Kernex Microsystems have developed the Kavach system jointly

with Research Design and Standards Organization of the Indian Railways.

•The importance & paced up implementation of kavach post this accident could benefit Hbl Power System.

Electronics :

Company vertical has delivered an exceptional performance in FY22 and is poised to sustain the momentum in the near term.
Company positivity stems from India’s unwavering focus on strengthening its domestic capabilities and export opportunities.

Having commenced deliveries of Type I & IV submarine batteries, The company sees a sizable opportunity to initiate the design and development of the Submarine Type II (HDW class) batteries in FY22. The prototype testing is in progress.
The company expects to commence production

and supply of these batteries in the current year. These developments further entrench presence in submarine space.

Company will work singularly on completing the development efforts of lightweight and heavy-weight torpedo batteries leveraging new chemistry. Having made

considerable headway in the Indian defense space.
Company plans to expand horizons. As a first step towards this ambition, Company seeks to widen export opportunities around thermal and submarine batteries. The success of thermal batteries used in the Agni Prime Missile has

deepened engagement with the DRDO. Companies are now developing various solutions for the DRDO which would further widen opportunity canvas.

Atma Nirbhar Bharat Abhiyan, Indian defence manufacturing is undergoing a massive indigenisation drive. Programmes like Innovations for

Defence Excellence (iDEX) are probably going to play a major role in it. In the 2022-23 budget announcements, the Government assured that 68% of the capital procurement budget will be from domestic industry.

Batteries :

PLT batteries as a superior power backup solution for

data centres, Company will continue to deepen engagements with all major data centre players in India for shifting to this solution. This could emerge
as an interesting opportunity as the Indian data centre industry’s capacity is expected to witness a five-fold increase.

After initial success with PLT batteries in the Indian Army, hope to extend the usage of such batteries for various applications. The NCPP battery space garnered encouraging volumes in the domestic markets. Company will now focus on enlarging overseas presence through agency

networks and intensifying customer engagement to increase volumes and gain market share in international markets. Company will identify and enter new geographies for Nickel Cadmium Fibre Plate (NCFP) batteries for rail applications.

The company will continue to sharpen focus on enhancing the quality of business and streamlining operational efficiencies to further scale profitability.
These strategies will help HBL stand out among the handful of battery manufacturers as a technology champion that focuses on

adding value to its customers through differentiated products.

Manufacturing Facilities :

Conclusion -

HBL is engaged in the business of manufacturing batteries and electronics power systems and products. The company has been able to reorganize its business into strategic business units viz; batteries, electronics and defence with batteries being the major revenue

contributor over the past financial years.
In order to reduce the concentration risk from the telecom sector, HBL Power is trying to increase its focus towards TCAS, TMS, wherein the management anticipates a pick up in the orders to be seen more from the TMS space from FY24.

HBL is one of the 3 approved companies in railways. Flagship products in TCAS & TMS. These products alone can alone double ebitda by FY 25, owing to higher margins.
Overall, with a lot of emphasis being driven towards renewable energy and electric mobility, energy storage

solutions, the company is set to play an important role to serve the economic transformation in the country. With triggers of strong order book and inflows, long proven track record of operations, diversified revenue base and considerable CAPEX.

HBL wins Railway KAVACH order worth ₹220 Cr.