HFCL

HFCL reported Q3 FY25 revenue of INR 1011.95 crores, a slight decline of 1.97% YoY and 7.47% QoQ. Despite this, EBITDA improved to INR 171.89 crores, up 5.16% YoY, with EBITDA margin expanding to 16.99% from 15.83% in Q3 FY24. Profit After Tax (PAT) stood at INR 72.58 crores, down 11.95% YoY, with PAT margin at 7.17%. The company's order book significantly increased to INR 10,410 crores from INR 6,151 crores in the previous quarter.

The company's strategy to increase its product-based revenue mix is progressing, with telecom products contributing 58% of total revenue in Q3 FY25, a substantial increase from 35% in Q3 FY24. HFCL has secured over INR 4,650 crores in BharatNet Phase III orders, including INR 2,501.30 crores for the Punjab Telecom Circle and INR 2,167.65 crores from Rail Vikas Nigam Limited for Uttar Pradesh circles. The management aims for a long-term revenue mix of 70% from products and 30% from EPC.

The global optical fiber cable (OFC) market experienced a slowdown due to various factors, leading to a decline in prices. The realization per fiber kilometer for OFC was INR 840 in Q3 FY25, down from INR 1,073 a year ago, while fiber price dropped to INR 266 per kilometer from INR 329. However, management believes prices are now at the low end and expects stabilization, with demand picking up from international markets and data centers. HFCL is increasing its IBR cable manufacturing capacity in Hyderabad, expecting completion by March 31, 2025.

HFCL is making decisive progress in the defense sector, with a new manufacturing facility in Hosur. The company has secured an LOI for electronic fuses worth a '3-figure, near 4-figure' amount from a NATO country, but testing is delayed due to a 9-month lead time for ammunition supply from government factories. Additionally, HFCL was the lowest bidder for a INR 43 crore tactical OFC contract for the Indian Army. Management expects defense revenue to start flowing in from FY26.

HFCL is the sole Indian OFC manufacturer exempted from European Union anti-dumping duties. This strategic advantage led the Board to temporarily halt the planned OFC manufacturing facility in Poland, saving INR 175 crores in capital expenditure. Instead, HFCL will leverage its existing Indian manufacturing capacities to cater to European customers directly, reinforcing its presence in the market.

The Union Budget's emphasis on digital connectivity for primary healthcare centers and government schools is expected to boost demand for broadband equipment and OFC, benefiting HFCL. The company is also developing point-to-multipoint UBRs to cater to the significant demand expected from BharatNet Phase III's rural connectivity initiatives, where 80% of the world market demand is for point-to-multipoint radios.

HFCL highlighted its strong position in the Indian market, claiming the highest market share for fiber optic cables. In equipment, it is the only Indian producer of 5G FWA CPE (100% market share) and holds a 90% market share for point-to-point UBRs. The company's product order book stands at INR 2,500 crores, split between INR 1,100 crores for OFC and INR 1,400 crores for various equipment, including INR 800 crores for routers and INR 500 crores for 5G products.