Growth momentum to continue…
About the stock: HPL Electric & Power (HPL), incorporated in 1992, is among India’s leading electric equipment manufacturer with a formidable presence across two major segments, 1) Metering & Systems and 2) Consumer & Industrials
• Metering & systems segment contributed ~58% to total revenues as of FY24, while balance ~42% by consumer & industrials. Company has 7 manufacturing facilities (5 in Haryana & 2 in Himachal) and 2 R&D centers. In meters segment, company has an annual capacity of 11 million units
Investment Rationale:
• Strong order backlog in smart meters segment with robust pipeline; execution remains healthy: We believe that smart meters segment will remain the key growth driver for HPL in the coming period. Company’s execution remains healthy in smart metering segment, which grew by 32% YoY in H1FY25. We believe that execution is expected to pick-up further in the coming periods led by increasing localisation with in-house manufacturing of required critical components. Company’s order book stands strong at Rs 3500+ crore as of Sept 2024 (~94% of OB is for smart meters and would be executed in 2-2.5 years). The order backlog implies 3.6x of TTM metering revenues, providing strong medium-term growth visibility in the segment. Moreover, the company is strongly positioned to get significant number of orders in coming future also as the tendering activities remains healthy. Out of 22.24 crore meters sanctioned by the govt, large part is yet to be awarded to meter manufacturers like HPL
• Comprehensive product portfolio; Consumer & Industrial segment too is poised to grow considerably: Company’s other segments like cables and switchgears are also witnessing strong growth led by healthy demand, augmentation of product portfolio and expansion of dealers and retailers network. With strong capabilities across design, development & manufacturing capabilities led by backward integrated manufacturing facilities & R&D centers, company has been able to diversify its product portfolio which now covers a wide range of low-voltage electric products. With focus remains on improving cost competitiveness, market reach and expansion of product portfolio, we believe company would see considerable growth in Industrial & Consumer segment also with healthy growth in switchgear and wire & cables and recovery in lighting segment
Rating and Target Price
• HPL is strongly positioned to witness healthy growth led by robust opportunity arising in smart meters segment. Moreover, consumer & industrial segment too is poised to grow considerably in the coming period. We estimate revenue CAGR of ~22% over FY24-27E while EBITDA & PAT to grow at ~28% & ~48% CAGR respectively over the same period
• We recommend BUY on HPL Electric with a target price of ₹ 660 per share (based on 30x P/E to FY27E EPS)
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