*HFCL Ltd* conducted their conference call today at 11:00 am. "More focus towards product business for better margins" Here are the key takeaways
Opportunities - Company plans to generate at lead double of their current revenues and margins in the upcoming years. - There are major 5 key opportunity area for business growth
1. Large scale FTTH cable roll-out.
2. Launch of Bharat net, creating a demand of 10 lakh cable km.
3. Additional spectrum of 4g network. 4. Heavy shift towards Wifi and related products for better margins. 5. Worldwide storm of 5G internet. - Company is prepared to take up anything that drops in the above category.
- Under 5g, both macro and micro sales in radios, small sell equipment are been taken care off. - Public and Railway communication has also brought huge opportunity growth for them. - Under the defense sector, there is huge demand for Night vision devices.
- New defense products are in light with huge demand potential. - Maximum movement with a constant flow of demand will come from the end of this calendar year and will stay for FY 22 and 23 as well.
Defence business - With companies own line of products they continuously receive small defence order on regular basis. - The company will take part in as many tender offers as possible to attain their target. - Company haven't received any payment hikkup for its products.
- But under the project side, there are hiccups related to work performance because of covid and previous tension of the India-China border. - This has to lead to an increase in companies working capital cycle and an increase in its debtors as well.
- They have also received metro projects in Kanpur and agro for telecommunications work. - Wifi 6 products are in the process to be distributed to the market players. - They target to distribute wifi access points all over India.
- Company manages to walk the talk of its optic fiber distribution work for 30+ countries. - They have commenced working at the Chennai plant for aerospace and defense purpose
Margins - Currently Business focuses towards Building up its margins by shifting business from project business to product business. - The shift will be from 72% of project business to 55% and product business from 27% to 45%.
- This will help them attain better margin, low working cap needs, and lower cycle as well. - All of the above statements are supported by Capex plans. - Previously the cost price of plastics and jelly have affected the business but now they are passed to customers.
Capex - Capex plans are been planned to double the revenues and Ebitda of optic business and accessories. - Company is going to conduct 170 cr capex for manufacturing defensive equipment. - In previous phase they did a capex of 100 cr.
- Apart from the above another Capex of 150cr is done to improve the RnD facility in Bangalore. - 40cr of maintenance Capex is also been expected along with further updates.
RnD - It is the key place for the companies growth. - Lots of new designs and products are launched and are underdevelopment. - There is a constant present for them. - For new capex plant, hiring work is done and along that various tie ups are also made.
- Company along with their tie-up with engineering company both locally and internationally. Have also procured equity stake in some of their workers. - All the necessary steps are taken to have the best realization of their capital.
Lockdowns and Pledges - There has been no major impact on business from 2 waves of covid because of no business shutting. - But from the service side, some stops are been made due to entry issues. - Related to pledging company has released 20% of pledges from the banks.
- Furthermore out of 8 banks 6 banks have given approval and 2 are under top management decision for further reduction. - Company tells that they will reduce to nill as the loan taken by the company can be easily paid off sooner