HFCL-SAST.pdf (582.3 KB)
Constant buying from market in last two months. last month not a single day has passed without purchase.
New order from L&T for 678 cr
In last two months they have purchased approx 4.5 cr shares from market . and we can get clear hint why they purchased, from above concall
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It seems Mukesh Ambani will buy stake in MN Ventures Pvt LTD.
Reliance have around 3 % stakes in company
Ambani will have controlling stake in MN Ventures (more than 3%) as it is developing 5G,wifi & Smart city products long with products for Defence forces which help Jio to reach on wider and large parts of country.
This is the only reason I think huge buying is going on.
Mr.Nahta is on Jio board.
Developing technology and implementing will be done by MN Ventures.
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Can we have the share holding list of MN Ventures Pvt Ltd.
Hi All,
i have done some reading of AR, con-call and wanted to share the notes here.
Company is not a OFC maker anymore. They have shifted focus to be a technology company - making products, Software solutions - aim is for them to provide complete solution offering to customers.
Biz is a mix of Telecom (still a major part) , Product driven telecom (IO Platform), Defense , Railways and Surveillance systems
Healthy order book~ 8000Cr (2X the sales - 18 Qtrs for completion)
57% BSNL Defense related , 14% OFC, 14% R Jio , 7% BharatNet , balance is smart city , Railway etc. . O&M component is steadily increasing (1600Cr is O&M long term revenue)
Mega Trends in the biz environment - relevant for HFCL
A. Defense indigenization - policy changes by govt to allow 20% for indian companies in the process. Focus to reduce reliance on strategic tools from China/outside . 63% to 30% import etc.
B. 5G and 4G - India has 0.6Billion users. Out of this 99% use mobile internet only. Has only 1.5Million connected with FTTx (Fiber to Home). This is not a good biz situation for telco’s …having OFC all over but not to cosumer end point wont allow them to provide value added services like OTT at home, broadband at home or security at home etc… Monetizing the 4G investment itself requires FTTH. 5G requires much more of it to be done…
C. Work from home - needs a good broadband connection. More people would like it in their own T2 cities …
D. China +1 factor - very relevant for network security worldwide.
E. GOI is pushing electronics manufacturing in India
F. Jio has promised 5G to be self sufficient system - no imports.
Things that are Good about HFCL
A. Addressable Opportunity size has GROWN a lot. -->
a. Ex: Electronic Fuse for defense is ~1Billion USD(over 10 years)
b. 5G etc requires a close to 1-1.2 trillion Rs investment over next years … 5G roll out in Delhi planned for 2022 …
c. Software defined radio - India defense 25,000 Cr opportunity size overall…
d. Company is participating in the above large tenders already - there are 3 mega tenders in the pipeline as of now (outside of order book - even one WIN will change revenue visibility drastically)
B. Dependency on Jio has come down drastically - from 63% revenue in FY18 down to around 14% of order book now
C. Management has executed well over last 30 years. From CDMA days to 2G/3G and 4G.
D. Clearly shifted focus to be a tech company - than a OFC company. - this is visible in R&D investments made in 2019-2020
a. Bought / invested in 3 startups for specific product focus areas
b. Has setup new R&D center in Bangalore
c. High profile hiring for R&D
d. Collaboration with foreign parties etc…
e. Chosen product platforms for development are razor focused on certain end user market and opportunity - clearly shows strategic wisdom of management.
E. IO platform launched - WiFI router, Access Points, Wireless LAN controls , Cloud Network management systems etc. https://ionetworks.in/
a. 100,000 orders in India for WIFI router already (~50Cr revenue contribution)
b. Trails running in EU, Middle east and ASEAN for IO platform products
F. Early stage proof available that company is able to create a product , solution and sell it to customers. - Jio strategic relationship is a huge advantage in my view.
G. OFC- invested in Optic fiber facility in HYD. This will result in better EBIT as 50% of RM cost was OF … - Will play out when plant is full operations - Q3-Q4 FY21…
H. A lot of Sr good hires in the management from other successful major players. -
Things that I don’t like
A. Management was linked to Harshad Mehta scam - I have not read much still. But a past hang at the back of the mind.
B. Biz is order driven - heavy Working capital needs . Competitive bidding nature of work.
C. Product development / R&D is 1-2 year work for new products. This is a mega shift for a company used to OFC … Need to see how it will cope up with this strategic / operational shift
D. Dependency on GoI is huge - Defense , Railways, Surveillance - Sales cycles are quite long + payment could be a problem - again Working capital + Cashflow.
Welcome your views please. My reading is that success of IO Platform for 5G + Defense trials success in 2021 will leapfrog the revenue possibilities. Mr. Nahata stated that existing Turnkey biz to continue+ additional revenue from product /platform sales.
Initial success of IO platform is giving confidence about product play and they have a proven ability to navigate GOI + foreign technology partnerships.
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In their concall they have mentioned that Bharti , JIO and others are planning around 350000 cr expansion in next 3 years. So even if they garner 10 % then it’s big booster , and it’s not difficult for them considering their relation with JIO .
And may be that’s the reason they acquired more then 5 cr shares around 4% from open marketin short span of 2 months.
Also I have tracked this shares since long. I think their is no red flags regarding accounts. Harshad Mehta scam was more regarding price manipulation in market and not proved.
Disc invested
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Hi Himshah,
Thanks a lot for your periodic updates here and valuable inputs, quite helpful.
Started studying the company, looks good, concall was good, promoters buying from open market is highly positive, business prospects look good with 5G coming in near future(stock also gave trendline breakout on monthly chart, which signifies fundamental change in the company).
Everything is pointing out to a perfect turnaround story and excellent future outlook, let us keep tracking the Receivables & Pledge.
Keep up the good work!!!
Regards,
Hafizul
Disc - invested
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Hope HFCL will get benefit with the above decision.
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Great results by HFCL
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Watch this CXO meet video to know 360 degree details on all aspects of HFCL.
Very useful one and highly recommended for all serious long term investors.
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Its showing lower top and bottom in daily charts. i think it can come to 25 -26 range. so its better to wait for entry .
disc : having investment position , exited trading position
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Results : https://www.bseindia.com/xml-data/corpfiling/AttachHis/cc44ed8b-72d2-430b-a42a-b9df7f6bdda2.pdf
Sales have increased
Quarter on Quarter : PAT has increased 50%
Need to observe their interest as they are increasing
Low tax advantage
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