Buy HFCL @ Rs.17.25 one Year Target Rs. 35 immediate Target Rs. 19 to 20

Positive Points                  

HFCL Supplying Optical Fibre cable to JIO                 

Companies Sales Growth is 18%                

Benefit of 5G implementation                   

Dividend paying Stock                   

About the Company 

HFCL was incorporated in the year 1987 to set up a plant in Solan (Himachal Pradesh) for assembling of telecom equipment. Subsequently, the company has ventured into various segments viz. Optical Fibre Cable (OFC) manufacturing in 1997 by setting up a plant at Goa and commenced rendering turnkey services in 1998. Under the turnkey services, the company provides and implements projects for complete site infrastructure for mobile operators, satellite & radio communication, optical transport networks and spectrum management solution and has worked for various private and government operators including major GSM vendors. HFCL earns majority of income from turnkey services (71% in FY19). Under sale of telecom equipments, HFCL manufactures and sells telecom equipment in Optical, Wireless, and Wireline technologies (like 2G and 3G Repeaters, Broadband, etc)

Mr Mahendra Nahata, the managing director of the company, has a business experience of more than thirty five years in telecom. He is also on the Board of RJIL since 2010 and is associated with various forums related to the industry. He is assisted by the management team comprising of officials who are highly experienced in their respective domains. The chairman of the board, Mr. MP Shukla, has over five decades of experience in the telecom industry and had worked at senior positions in various undertakings owned by the Government of India.

Bullish Optic Fibre Cable (OFC) Demand & Government initiatives spurring broadband outreach Government and Private Operators are investing substantial capital in upgrading telecom infrastructure. National Digital Communication Policy, 2018 sets aggressive 2022 targets with broadband for all. Only 20% of sites in India are fiberised, a number that needs to go up to 80-85% to support 5G and its enabling technologies IoT, M2M. Even 4G needs fiberisation upto 60-65% of sites. Shift from wireless to Optical Fibre is taking place in a gradual and mammoth manner. Fibre spread and its densification shall ensure fibre reaches the doorstep of consumers. With 4G on rise and 5G on the anvil, microwave-based backhaul will become less effective. Nearly 70% of the India’s towers will need to be fiberized by 2022 from the current levels of sub-25% requiring an estimated 600,000 fKm, at an investment of $8 billion Also, there is a significant untapped potential still left in the rural space and with government’s renewed focus on developing rural telecom infrastructure to use telecom services to effectively reach out to the real beneficiaries of its various welfare schemes. Furthermore, with Smart Cities Mission and Digital India Initiative, the requirement of network infrastructure at integration as well as end-user points is expected to rise. One of the projects under the ‘Digital India’ initiative is ‘BharatNet’, launched to deploy high-speed optical fiber cables to connect 2.58 lakh Gram Panchayat across the country by end of 2019. This project would also help in increasing the fiberized sites in India which currently stands at less than 20% as compared to other developed countries. Also, ‘Smart Cities’, 5G deployment, Machine to Machine (M2M), Internet of Things (IoT)’ require advanced information technology and connectivity landscape. Further, next generation technologies such as LTE and FTTx, which require last mile connectivity, would also propel the demand for optical fiber cables.