Mid-Cap Stock Under Rs 100 Secures Rs 2,501.30 Crore Order– A Multibagger in the Making?

Big Government Deals Make This Stock a Strong Contender for Growth

HFCL has signed an agreement with Bharat Sanchar Nigam Limited (BSNL) to execute the BharatNet Phase III project in the Punjab Telecom Circle. This follows the Advance Work Order worth Rs 2,501.30 crore received earlier. HFCL is the first company to formalize such an agreement under BharatNet Phase III and will now begin project implementation.

Telecom Industry Growth
India has over 1.19 billion telecom subscribers, making it the second-largest telecom market globally. Data usage has surged tenfold since 2018, with 5G adoption expected to reach 350 million subscribers by FY26. The global telecom market is projected to grow from USD 2.32 trillion in 2024 to USD 4.21 trillion by 2034, at a CAGR of 6.15 per cent.

Market Trends and Demand
The demand for broadband equipment and optical fiber infrastructure is rising as telecom operators upgrade for 5G. However, geopolitical tensions and government program delays have impacted the optical fiber cable market. The BharatNet initiative and AI-enabled services are expected to drive demand growth.

HFCL’s Order Book and Performance
HFCL’s order book has grown to Rs 10,410 crore from Rs 6,151 crore in the previous quarter. Key orders include Rs 2,501.30 crore for BharatNet Phase III in Punjab and Rs 2,167.65 crore from Rail Vikas Nigam Limited. Q3 FY25 revenue stood at Rs 1,011.95 crore, with EBITDA at Rs 171.89 crore and a profit after tax of Rs 72.58 crore.

Product Development and Exports
HFCL has launched two Unlicensed Band Radios (UBR) and completed over 350,000 deployments. The company is focusing on increasing production capacity and aims for a higher export revenue share from optical fiber and telecom products.

Defense Sector Expansion
HFCL has inaugurated a Defense Manufacturing Facility in Hosur and is optimistic about future orders for defense products like electronic fuses and tactical optical fiber cables. Revenue from the defense sector is expected to start contributing from the next financial year.

Challenges and Future Prospects
Despite a slowdown in the optical fiber cable market, HFCL remains optimistic about growth due to BharatNet and other connectivity projects. Margins have been impacted, but the company aims to achieve a 70:30 revenue mix favoring products. International expansion, especially in Europe, is also a key focus area.

Stock Valuation
HFCL has a market capitalization of Rs 12,938 crore. The stock trades at a price-to-earnings ratio of 35.4, close to the industry average of 35. The return on capital employed (ROCE) is 13.3 per cent, and the return on equity (ROE) is 9.34 per cent. The stock is trading at Rs 89.78, up by 1.07 per cent as of February 20, 2025.

Disclaimer: The article is for informational purposes only and not investment advice.