HFCL shares zoom 100% in one month. More gains ahead?
Premium- In the past year, the company’s shares have risen by 498% on the bourses
Shares of Himachal Futuristic Communications (HFCL) surged 20% on the BSE on Monday after the company set up a second open wifi-powered village in Karnataka, ahead of its board meeting.
Input Output (IO), a product by HFCL, has deployed a second so-called ‘PM-WANI Village’ network in the Baidebattu village located in Karnataka.
The network will provide wi-fi-based internet access to 9,000 residents of the otherwise poorly connected village, the company said.
The company’s board will meet on 12 July to consider and approve the results for the quarter ended on 30 June.
What led to the sudden surge in the share price of HFCL?
A sharp rally in the stock price has seen market capitalisation of HFCL vault past the Rs100 billion mark. Currently, it stands at Rs120 billion on the BSE.
The company is one of the largest telecom project service providers for Reliance Jio and is currently engaged in the rolling out of 4G optical fiber cables (OFC) network services across Northern India.
Apart from deploying networks in Punjab and Jharkhand, HFCL also supplies fibre optic cables in Maharashtra, Telangana, and Chhattisgarh under Bharat Net projects.
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5G technology is the next big upgrade for telecommunication networks and HFCL is gearing up to offer various products, solutions and services for this segment.
The capex required for 5G deployments in India are likely to entail massive investments of around Rs3,650 billion in the next 5-6 years.
Open radio access network (OpenRAN) architecture enable network operators to design and implement 4G and 5G networks from different vendors leading to huge opportunities for manufacturers.
Under Bharat Net Phase II Project, Wi-Fi, infrastructure, electronics and optic networks bring out a Rs400 billion opportunity.
In a statement, the company said, the disruptions caused by Covid-19 pandemic have increased demand for home and industrial internet of things (IoT) devices and applications.
The production linked incentive (PLI Scheme) by the government to incentivize the indigenous telecom product manufacturers increases the profitability and competitiveness.
HFCL expansion plans in India
Even though pandemic resulted in massive chaos across multiple industries, the tech industry witnessed significant growth resulting in expansion plans by companies.
HFCL has also hopped on the bus and earmarked ₹2 bn for the current year.
A major chunk of the funds will be used for the expansion of capacity at its Hyderabad plant and the restructuring of Goa and Chennai facilities.
HFCL is eyeing 5G radio access network (RAN) products such as Macro RU, 5G outdoor and indoor small cell.
Not only this but 5G transport such as cell site, fronthaul gateway and aggregation routers will also be included in the development of 5G products.
Mahendra Nahata, who is the managing director and HFCL promoter, said that India is on the verge of a 5G revolution, and commercial rollouts are expected to commence from next year, which will be followed by spectrum allocation.
Equitymaster's view on the telecom sector
We reached out to Tanushree Banerjee, Co-Head of Research at Equitymaster, and editor of the premium stock recommendation service StockSelect, for her view on the telecom sector.
While the telecom sector can have huge upsides due to 5G, investors must be very selective about the stocks. Higher-than-expected investments in spectrum acquisition or 5G deployment remain a risk. Other than a few telecom companies, most others do not have sufficient balance sheet strength, Banerjee said.
How the stock markets reacted to HFCL
Shares of HFCL opened the day at Rs94 on the BSE and Rs92 on the NSE.
At the time of writing, the company’s shares were trading 7.4% higher on the BSE. At its current price, it is trading at a P/E of 45.4.
The share touched its 52-week high of ₹95.7 and 52-week low of ₹11.3 on 6 July 2021 and 28 July 2020, respectively.
Over the last 30 days, the HFCL share price is up 100%. Over the last one year, the company’s share price is up 498%.
The scrip was trading at its highest level since February 2002.
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About HFCL
HFCL, formerly known as Himachal Futuristic Communications Limited, is a publicly listed telecom company incorporated in India.
It has been in operation since 1987 and is into various segments of manufacturing, research and development (R&D) and turnkey solutions.
Ever since its inception, the company has entered various streams of hardware integration in telecommunications.
The company’s manufacturing facilities are located at Solan in Himachal Pradesh, Salcete in Goa, and New Delhi.
It is geared up for meeting the new generation access network demand in future.
For more details about the company, you can have a look at HFCL factsheet and quarterly results on our website.
(This article is syndicated from Equitymaster.com)
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