We interacted with the management of HFCL to understand the company’s growth prospects and future outlook. A number of bullish factors have come together which ensures bright prospects for HFCL in the long term.
We remain optimistic about the company’s future performance due to: 5G rollout in metros, 4G expansion in remote areas, FTTH/broadband penetration and BharatNet are expected to be an ₹3-lakh-crore opportunity in the OFC space. HFCL is expanding its OFC capacity from 23.4 fibre km (fkm) to 34.8 fkm. As part of its backward integration, HFCL is also expanding its optic fibre capacities from the current 8 million fkm to 10 million fkm in FY23.
The telecom equipment will be supplied to domestic as well as European and US companies, which are expected to increase export revenue from ₹350 crore in FY22 to ₹1,500 crore in FY24.
The defence electronics and telecommunication market is estimated to be ₹1-lakh crore and the company is expected to be benefited from the new Defence Procurement Policy of the government.
Diversification in these new verticals is expected to improve business opportunities for HFCL and de-risk the overall business model. In addition, both telecom equipment and defence electronics are high-margin businesses. Hence, an increase in revenue share from new verticals could improve the company’s operating profitability and cash flow.