Hi Hitesh Sir any views on Raymond reality and Garuda construction’s. It is having deep value. @hitesh2710
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In case of HBL the management gave two important footnotes related to results. First was that this q2 quarter was an extraordinary quarter and may not be repeated for future quarters.. Second was that FY 26 is going to be an extraordinary year.
First thing that I found was that electronics division revenues were to the tune of 800 crores. This was largely Kavach. I think this segment should continue to do well going forward too. I am hearing that further order allotments are also in the pipeline. And since HBL has been quickest off the blocks in terms of execution, it might find higher percentage of orders, if this criteria is considered favorable.
Besides Kavach, defence could be a growth driver going forward. There are a lot of pointers to fuze being a good business going forward.
While evaluating a company, attaching a single quarter results to the investment thesis seems a bit too simplistic. We have to look at the overall picture and then take a call.
First half profits have exceeded 500 crores.. If next two quarters also total 500 crores, then full year FY 26 profits can be 1000 crores. Current market cap is around 26000 crores. Based on that valuations will be 26 PE. This for a company that has decent growth opportunities lined up is not too expensive.
Some other aspects of results that are positive but markets might feel negative are the margins of the electronics division. Margins above 50% are a great number to have, but there will be worries that these margins may not be sustainable. While that may be valid concern, we have to base our calculations on slightly lower margins say around 40% and do the math.
With the kind of results reported, we are assured that execution is never a problem with HBL management. Second aspect is that with these kind of margins being reported, the concern that is there in a lot of other companies related to siphoning of funds is out for a toss. Kavach tailwinds can continue for the next 2-3 years, so growth can continue. Margins may fluctuate but overall the base levels of net profits has probably shifted much higher in HBL from earlier 300 crores net profit levels. It remains a debt free company. Management indicated possibility of investing in some high growth high potential companies or start ups. Tonbo has been a great investment for HBL.
Overall picture to me looks good for now. I may be biased because I am invested in the company and its one of my top allocations, and hence to that extend my views should be taken with a pinch of salt.
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Thank you, @hitesh2710 sir. I’d like to contribute one data point: Tonbo Imaging, one of the invested companies, achieved a net profit of INR 72.7 Cr in FY25, representing a 6.3% growth from INR 68.4 Cr in the prior fiscal year. A successful listing of Tonbo Imaging would also provide an inflow of cash for HBL.
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Yesterday marked some more positive newsflow for HBL eng related to Kavacch.
Cancellation of GG Tronics Kavach order for around 600 crores will go in for re tendering (unless something else comes out of the blue) . This could also set precedence for similar order forfeiture with other companies which had bid for Kavach, and had been given orders, and could not execute order in stipulated time frame.
New tenders for Kavach worth 2100 orders have been floated from BLW. This again provides opportunity for companies which have got Kavach 4.0 version and have demonstrated order execution in stipulated time frame.
Another aspect of this whole drama is that order awarding to companies not capable of executing them in time would be discouraged. Because this whole process impacts timely rollout of Kavach, which remains one of the top priorities of the govt.
Overall this improves Kavach revenue visibility possibility for HBL as it now is in pole position to bid for and get awarded more Kavach orders.
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I afraid same is true for HBL too.. The Chairman had mentioned during the AGM that they won’t be able to complete the entire 2200 loco order before 11th Dec 2025 (tender completion due date). So let us see how it is going for HBL also..
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Electronics division accounted for 794 crores revenues in q1. ( roughly 1000 plus locos ). So expecting some ramp up and trying to complete the full 2200 till 11th Dec could be possible. How the actual things pan out needs to be seen. I think even if some part of order is forfeited, it will be by a small margin..
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Hello @hitesh2710, Sir, have you been following this company called BCC Fuba? It is a PCB manufacturing company and has a niche product that is used in the EMS industry. The company has recently started doing capex, and it feels like a turnaround story. It would be great if you shared any insights of yours.
@hitesh2710 Hitesh bhai, after going through your threads, I’m genuinely impressed by how early you identified opportunities in companies like Thangamayil and TTK Prestige. For the past couple of years, I’ve also been trying to find similar early-stage compounders, but I often struggle with the valuations at which quality businesses trade today.
If you could share a few company names that you feel have strong long-term potential in the current market, I would be truly grateful. My intention is purely to study them in depth and understand what makes them promising. Anything that passes through your filters is, in my view, worth spending serious time researching, and it would really help me develop stronger conviction in my own process.
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@hitesh2710 bhai, FIIs have been sellers in the market almost for a year now.. Despite this sustained selling pressure, the market has remained relatively resilient because of strong and consistent domestic flows via mutual funds and retail participation. Even with FII outflows, current market valuations appear to be on the higher side.
I may be wrong but I guess there may not be immediate very strong earning growth seen in short time.
Could you please share your view on If and when FIIs turn net buyers again, how should we think about the impact on overall market valuations? Or it looks unlikely that FII will not return unless there is valuation comfort and there is very strong earning growth which can abosrb the additional liquidity from the FII without elevating valuation?
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FIIs have been on a selling spree since a long time. And they continue to sell even as we talk about this topic.
If I am an FII, I have the whole world to choose from in terms of where to invest. So we have to figure out why an FII, or FIIs for that matter would want to invest in India.
I see their problem as two fold.. First is the USD INR equation. Rupee has been continuously weakening and that causes currency losses for the FIIs. In simple terms, say when USD INR is at Rs 60, they have to sell Indian equities only worth Rs 60 to get their dollar back. Whereas if it is at 90, they have to sell equities worth 90 Rs to get their dollar back. (Converse logic will work when they start buying, but they have to be sure that US INR is going to be steady, or go up to say 80-85 or something like that. )
Second problem I think they face is taxes. If you are incurring currency risks, and investing in Indian markets, you want atleast long term taxes to be negligible or nil. Reducing LTCG or removing it can be a quick fix for the govt to attract foreign money, if it does want to do so.
If I were in a policy deciding role, I would do away with both short term and long term taxes and increase STT. This to me looks attractive because no matter who makes profits or losses, govt does end up getting money in form of STT and its paid upfront. Govt does not have to wait till the investor sells to collect taxes. Besides it can be a very efficient mechanism of collecting taxes. I think even with all recent advances in softwares in IT dept, there will be still be folks who might not be declaring ST or LT gains and avoiding paying taxes.
Coming to next parameter of growth, there will always be a few companies which will show good growth each year. So it all boils down to finding those kind of companies.
I personally do not give too much importance to what FIIs are doing because that is not something under my control. What I can do is research individual companies and find those with best growth prospects and available at reasonable valuations. The current correction in small and midcaps is a fertile ground for finding those companies. Simply running a screener showing companies that have shown good growth and have given good commentary will provide a list of stocks to work with. These days a lot of Youtubers also provide such information on their videos.
@Karthi_Keyan1 I don’t want to venture into the quicksand of talking individual stocks, unless I can put up details of a company with all published information. When I find something worth discussing I will put it up.
@manan1 I have not heard of BCC Fuba.
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Another (possible) reason for FIIs selling is the rising yields of Japan (JGBs). For years carry trade was easy for big trading houses to borrow in ¥ and invest elsewhere. All leading dailies are reporting this unwinding of trade structure.
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When yields on Japanese bonds rise, investors, especially large institutions, get an incentive to shift capital back home to safer, higher-yielding Japanese assets.
“When Japanese bond yields rise, global investors may shift capital away from emerging markets like India. This can lead to temporary FPI outflows, a weaker rupee, and upward pressure on Indian government bond yields,”
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