Himachal Futuristic communication

Stock Opportunities Untested - but worth a good look
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Q3 results summary - also summary from interview of Mr. Nahatha

a. Results have been quite good. pls check numbers on your own. what caught my eyes is increase in employee cost , decrease in material cost and increase in finance cost.
– Clarification from Mr. Nahatha
. Employee cost due to R&D new hires. expected to go up in near future as Bangalore R&D center would be fully operational.
Finance cost ~9.5%
Raw Material prices have fallen in the market and has helped the company. expected same for Q4.
–overall EBIT improved by 1.8% which I think they will make it again.
key factor contributing is product revenue is increasing - WIFI Router + Telecom products + OFC % improving v/s turnkey solutions. as more products are inhouse designed and manufactured the trend is expected to continue.
HYD facility is operational . They have invested to expand capacity already + more capacity to be added in FY21 as well. THey are extremely bullish on the FTTH cable story overall.
Market reception of WiFI router has been very good. - 54Cr contribution in Q2 and about 70K in Q3. (telecom products excluding cables)
Export sales has increased about 40% QoQ. they have invested in sales people in key markets to improve this further. Internal target of 300% export revenue growth
Overall demand is strong, EBIT has improved and Q4 would be inline with this EBIT.
Key Risks noticed
a. Debtor days have increased. key reason being COVID related receivable delay. some project exectution delay due to Covid as well. expect to come to normal levels in Q4.
b. Defense product sales - eFuze , Night vision & High Capacity radio - products are ready, tested etc. Approved for RFP by defense but decision to award will take time. for eFuze - 4 key players in the round , L&T., BEL, ECIL and HBL. Only HFCL is designed and made in india . others have tech tie up and IP is not owned by them.
for eOptics as well - story is same. they have designed and made 3 products already and have been shortlisted by defense . trials are to start.
High Capacity radio is where i think story is better. still no decision on RFP. .
Defense deals will take time and this could be end of FY21 or even FY22 before it hits the books.

Short term uptick hence is depending on FTTH and Telecom products story. Which has a huge demand pipeline as well and hence not very concerned about defense not materializing into revenue anytime soon.

One good thing i noticed is that for Railway communication network - they seem to be the only player in India who has deep expertise owning to lot of key projects that they have delivered already
a. Dedicated freight corridor project
b. Delhi Metro
c. Dhaka Metro
d. Mauritius Metro
Final Summary - 2021 revenue uptick is lot more dependent on
a. On time execution of projects and revenue realization
b. More secular demand for telecom products (WiFI , switches , UBR etc) - some export order would be nice. there are trials ongoing in ASEAN and Eu at the moment already.
c. OFC, FTTH - more installation and export
d. Improvement of the working capital cycle
e. R&D center - fully operational.

Discl : Invested

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Excellent analysis on key parameters
2021will be the key year where the defence products will get on stream
Once the stock crosses the threshold levels it will see much more stream. Maybe a strategic divestment of a small equity to a renowned player will help wipe off old image

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I think we need to pardon them for their past follies they have paid very heavily. The business now looking so strong & all plants firing to capacity only a fool promoter will jeopardise this momentum. Moreover I don’t think the Jio management will allow them to go astray & will keep the current management under tight fist.
The R& D setup & the defence products will be game changer
Basic fundamentals says the business they are is a sunrise business & even if they want screw it will be difficult for them

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When sterilite is leader in all the products of himachal futuristic … any top 2 points why it is better than sterlite… please enlighten me… if my thought process is worng…

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transcript of concall of dec results
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Hi,
strategy of Sterlite and HFCL is totally different. Sterlite is trying to become a cloud service provider - investing into software development , Data center management etc.
HFCL is trying to become a telecom / electronic products company

  • addressable market for both in future is going to be quite different. - pls see posts above on addressable market for HFCL.
    For both, traditional OFC is going to be for back end integration - to use that into turnkey projects etc. though in near future for HFCL this is a volume/profit driver. - this is a commodity and wont help in long run to depend on OFC alone.

Sterlite - management is a problem - completely not trust worthy in my view (same as Vedanta). Its a great company and i believe they can get PE valuations like TATA Communications in future but management does not care about retail investors. In case of Vedanta since delisting did not work, they still have to keep paying hefty dividends to make promoter rich… so we benefit… same for hind zinc… but in Sterlite tech - i dont see how we will be taken care off…

if anyone else believe Sterlite Tech is an investment - pls let me know. i could not get conviction on Agarwals.

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Should we be concerned about the outstanding payment from bsnl? Is this dampening investor sentiment in the short term? Maybe, their product business will make up for cash flow issues eventually? Also, should we be concerned about the negative outlook forecasted by care rating agency?

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Q3 results are fantastic. It gave an 60% return in the last six months months and 100% return in the last one year. But can we expect the same performance in the future is a question. In spite of the seemingly good results, the controversies mentioned in the debate makes it a doubtful choice for investment, I think one may try with a small amount of money.

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HFCL_001
HFCL_001792×612 57.5 KB

as expected it has come to 26 , now i think range will be upper 32 and cross 34 then can go to 40 and downside if brakes 24 then 21.

disc invested . i am not sebi regd , its my personal view for chart study purpose

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The Union Cabinet on Wednesday approved a Rs 12,195-crore Production Linked Incentive (PLI) scheme for domestic manufacturing of telecom and networking products such as switches, routers, radio access network, wireless equipment and other internet of things (IoT) access devices.

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The Company is acquiring stake in Nimpaa Telecommunications Private Limited, keeping in line with thrust on addition of new telecom network products in the field of communications, specifically Aramid Reinforced Plastic (ARP) rods.

ARP rods shall be manufactured and supplied by Nimpaa for HFCL, its subsidiaries and associate companies’ captive consumption.

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HFCL has won a Rs.221 crore order from Uttar Pradesh Metro Rail Corporation Limited (“UPMRC”) for Kanpur Metro (Corridor-! and Corridor-11) and Agra Metro (Corridor-1) Projects. Under these Projects, the Company will be setting up telecommunication systems for 32.4 kms of Kanpur Metro and 14 kms of Agra Metro and this will be completed in next 33 months.
Prior to this, HFCL has successfully executed telecommunication networks for rail projects with Dedicated Freight Corridor Corporation of India Limited (“DFCCIL”) (A PSU under Ministry of Railways) for Eastern as well as Western Dedicated Freight Corridors, and international Metro Rail projects in neighboring countries like Bangladesh & Mauritius.
The scope of work under the Projects include design, manufacture, supply, installation, testing and commissioning of Fiber Optic Transmission System, Telephone System, Train Radio Tetra System, Public Address System, Passenger Information Display System, Master Clock System,CCTV System, Access Control System, and uninterrupted Power System (for Signaling,Telecommunication, Automatic Fair Collection and E&M Equipment), Supply of Spares, DLP maintenance, and training of operation & maintenance personnel for these systems.
The construction of Agra Metro Project was inaugurated by the honorable Prime Minister Shri
Narendra Modi in December, 2020. The Agra Metro will connect major tourist attractions like Taj Mahal, Agra Fort, Sikandra with the City’s other transport nodes like railway station and bus stands.
On the other hand, civil construction works of Kanpur Metro’s ‘Priority Corridor’ from ‘liT to
Motijheel’ was awarded last year and is being executed at a brisk pace since unlockdown.
Mr. Mahendra Nahata, Managing Director, HFCL Limited, said, "We are pleased to share Rs.221 crore order win from UPMRC. In this, HFCL will design, manufacture and install
telecommunication systems for Kanpur Metro and Agra Metro that will boost smart rail
connectivity of citizens and travelers in these important cities and make them future ready. There were some large Indian and multinational companies participating in this tender but HFCL won the order competitively based on our deep expertise and vast experience in successfully executing such metro & rail projects domestically as well as internationally."https://www.bseindia.com/xml-data/corpfiling/AttachLive/a223019e-f55c-4058-ba06-661dd71b14c0.pdf

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HFCL : some rough notes from management meet

Telecom market is in good growth phase.

4G network is growing.

The operators growing to increase networks

FTH : rollout by Airtel and Jio

BharatNet : connect every village through FTH. Demand of infrastructure of cable, equipment.

5G will happen in our country soon.

Auction will be done by CY21.

All this will result : Huge demand of telecom equipment and fibre optic cable.

Demand will be more than be more than 2lac cores in next 3 years.

Internationally same things are happening.

Look at equipment and design ourselves. Huge spend in R&D in gurgaon and Bangalore. R&D partnerships, designing equipment for us.

As products supply to operators will increase profits.

When we design own, we are competitive, we will be able to export.

We cannot export more than 100-150 crores since capacity is not there.

We are increasing capacity in fibre optic cable. Expected to grow by 60% in FY22.

Deiversifying in defense electronics, designing locally, make us competitive.

Different business :

Fibre optic cable : Hyderabad(expanding capacity here), Chennai, and Goa (74% subsidiary). We are largest player here. We are backward integrated due to fibre produced locally. We have better control on quality and supplies and low cost. Our order book is full. Capacity will further strengthen on economies of scale. We are running 24*7

Switches, routers, wifi, 5G compatible.

Demand of 5G equipment will be internationally also.

2nd business is defense communication. Currently 4 projects, when started 8000 crores now 3000 crores left to billed.

Designing on own products.

HFCL selected as development partners

Railway communication :

Dedicated freight corridor, sub contracts from LT.

Direct contract from Kanpur Agra metro. 120 crores

Turnkey projects :

Jio, we implement network. Fibre optic network. 250 towns from jio.

Defense electronics :

Designing electronic fuses. Own technology, very few who develop on own. Demand is worldwide.

Nightvision devices.

FY21 will be more than FY20. 4000 crores of revenue.

7300 crores of order book.

Revenue growth : 20-25%.

EBITDA/PBT margin is expected to grow.

For Capex, our D/E is very low.

We want to grow margins.

We will apply in PLI Scheme. We are awaiting details.

Competitive intensity :

Fibre optic : it is not only price, quality, timely delivery and price.

Quality : Fibre optic is small % of total network cost, like nervous system, hence one section has problem affects large network.

Jio, Airtel trust us. We are prime suppliers. Bharat net we are there, Tata projects we are there (Tata communication). ITI is also our customer. We are exporting in 30 countries.

Economics of scale kick in. Source cheaper, manufacturing cheap. Timely delivery.

Margin guidance : EBITDA margin of 13%. We will see reasonably good improvement of margins.

Fibre optic capacity : 17 million kms.

Some strengthening of fibre prices. 5-10% increase in price not more than that. We will pas cost.

Next FY 225 crores Capex. 80 in fibre optic. Some in capital R&D or equity investment in companies who design for us.

Net WC days : roughly around 114 days, gradually go down in 2 quarters. By September it will close at 90 days.

4G : not big growth

5G : tower required, 3 times more tower.

Vodafone idea : needs funds to raise.

Revenue split :

1200 in cable

1900 in defense

700 crores : turnkey

Private : Public 30: 70. IT will change since revenue from private will improve.

Top 5 : Jio : 1200 crores, BharatNet, Defense, LT, Tata communication.

Fibre optic cable competition : Sterlite, Vindhya. Major ones. Thats it.

Barriers to entry : just by putting factory u cant become suppliers. There are 20, why are only 2-3 full capacity. Reason is simple: We need reputation, economic of scale, competence.

Lead times for expansion of fibre optic cable : 6-9 months (brownfield).

Greenfield : minimum 15 months.

Market share in Fibre optic cable : 60% market share.

BSNL : 125 crore was due. Earlier was 200 crores. 125 crores slow payment. Next 6 months should be clear.

Market size is big, its only how much u can cover.

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Accumulated Depreciation is in range of 70% while vindya is 15%, sterlite in 30%? why can’t sweat the asset much longer. some one through some light in this ?

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hfcl to consider dividend

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Investor presentation

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concall excerpts q4fy21:
ofc market share : 60%.
ofc project 45% : product 55%.
changing product mix. margin of project business 8-10% while product ranges in 12-15%. To reach 10 cable kms from 8 cable kms. wifi systems sold 1.5 L vs 1 L previous qtr. target 2L next qtr.
price firmed up rs 900, while historical price of rs 1100 may add value to revenue.
fully equipped to meet upcoming demand from 5G.
fy 22-23 is going to be transition period.
fy22 capex : ofc Rs.170 , Defence Rs. 40 cr. R&D Rs.120-130cr. part capitalized and opex.

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Concall

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