HFCL - HFCL LIMITED Share Price

Management's outlook for HFCL indicates a strong rebounding trajectory for FY26, driven by significant order backlog and capacity utilization returning to full scale. The company anticipates revenue growth of 25-30% overall for the current financial year, with major growth expected to begin in Q2.

Key forward-looking points include:

1. Order Book: HFCL's order book stands at Rs.9,967 crore as of March 31, 2025, compared to Rs.7,685 crore the previous year, highlighting a solid pipeline for growth.

2. Optical Fiber Cable Expansion: The company's optical fiber manufacturing has begun operating at full capacity, compared to 45% utilization in FY25. Revenue from optical fiber cable is projected to increase significantly in FY26.

3. Defense Sector Investments: HFCL is increasing its focus on the defense sector, supported by government policies favoring domestic procurement (75% of capital budget for domestic players). They have signed technology licensing agreements with DRDO and are progressing in multiple defense product developments, including ground surveillance radars and electronic fuses.

4. Fiber Demand Projections: The company expects a doubling of revenue from optical fiber and associated products due to rising global data center demands and domestic market growth.

5. Upcoming Product Orders: HFCL has received orders worth Rs.800 crore for new MPLS routers designed for 5G networks, and significant orders for fixed wireless access equipment, reflecting strong market acceptance.

6. Sustainability Initiatives: HFCL has achieved an ESG score of 70.9, underscoring their commitment to integrating sustainable practices into their operations.

This growth potential, combined with strategic investments and a focus on innovation, positions HFCL favorably amidst shifting market dynamics and increased demand in telecom and defense sectors.

Major Questions and Answers from the Q&A Section

Question 1: "What are the strategies in place to regain global market share, especially in Europe and Southeast Asia? And what is the impact of reciprocal tariffs imposed by the U.S.?"

Answer: Export is crucial for us, accounting for about 12% of sales. Without China, India's market share is just 5-7%, so we must export to grow. Our fiber optic cable exports, previously subdued, are now rebounding. We focus on high-count cables for data centers, especially in North America and Europe. The 10% U.S. tariff hasn't significantly affected us; we're optimistic about a multi-fold increase in exports of telecom equipment, including Wi-Fi access points and fixed wireless access equipment.

Question 2: "What's the difference between requirements from data centers and TSP? What market focus do we see in data centers?"

Answer: Data center demand is driving significant fiber optic cable growth. They require higher quantities of fiber compared to traditional telco applications, which we're focusing on. We're not only supplying fiber but also passive connectivity solutions for data centers. With the rise of AI and cloud storage, this demand will continue over the next five years, making data centers an essential market for us.

Question 3: "What are your views about the demand for Fixed Wireless Access (FWA) equipment in India and internationally?"

Answer: FWA equipment is in high demand in India and many foreign markets. We're manufacturing both domestic and international versions, with the Indian model focusing on outdoor equipment. We've supplied over 500,000 units domestically and received orders for more. Internationally, we'll export indoor models for different frequency bands used in those markets.

Question 4: "What is the outlook for defense products in India and our role in the sector?"

Answer: The demand for defense products is expected to surge due to heightened security needs. We're focused on ground surveillance radars and night vision devices, with revenues starting from Q2. Our unique products include electronic fuses and drone detection radars, the latter nearing production this financial year, showing our commitment to enhancing defense readiness.

Question 5: "What revenue growth are you expecting in FY '26 and the reasons behind it?"

Answer: We're estimating a 25-30% revenue growth in FY '26, particularly due to recovering demand in fiber optic cables and new projects in defense and EPC. Given our strong order book and operational improvements, we anticipate sustained demand in these segments later this year, with significant growth driven by data centers and telecom expansions.

Question 6: "What will be the capex outlay for FY '26, and what areas will it focus on?"

Answer: Our planned capex for FY '26 is approximately INR 188 crores. This includes INR 138 crores for expanding optical fiber capacity to meet new specifications for data centers and additional funds for testing and pilot production in the defense sector. We see increased demand, warranting this expansion.

Question 7: "What is our current scenario on inventory levels for global operators and pricing for optical fiber?"

Answer: The sluggish market was due to built-up inventories that have now cleared. Currently, we have increasing demand with no inventory buildups left. Pricing is around INR 905 per fiber kilometer for cables and INR 259 for fiber, with minor fluctuations. We expect demand to stabilize and grow significantly based on the rapid advancements in tech and communications.

Question 8: "How will the margins trend be for different product segments, and can we maintain margin profiles?"

Answer: While margins will vary by product line and client, I expect them to remain stable akin to the margins of FY '24. O&M margins may be better due to their annuity structure. However, since margins can differ significantly by customer, we'll continue optimizing for profitable contracts while ensuring competitive pricing.