HPL Electric & Power Ltd has been a dominant player in India’s electrical equipment manufacturing sector for over four decades. Specializing in key product verticals such as metering solutions, modular switches, switchgear, LED lighting, and wires & cables, HPL has made its mark across diverse customer segments, including power utilities, government agencies, and retail and institutional buyers. The company exports its products to over 42 countries, solidifying its global presence.
Recently, HPL Electric has gained momentum in the stock market. After a 2% surge on September 13, 2024, shares closed at ₹596, driven by a significant ₹144 crore order win for smart and conventional meters. Despite this surge, the stock slipped slightly by 0.53% after the rally, presenting investors with both opportunities and risks. Let’s delve deeper into HPL Electric’s financials, growth potential, and the outlook for its stock.
Table of Contents
HPL Electric’s Growth Potential and Market Presence
HPL holds a dominant position in several product categories. The company commands a 50% market share in on-load change-over switches, 20% in the domestic electric meters market, and 5% in the low-voltage switchgear market. Additionally, HPL ranks as the 5th largest LED manufacturer in India. This well-established market presence, combined with its strong distribution network of 900 authorized dealers and 45,000+ retailers, underscores the company’s strong footing in the industry.
HPL has also outlined ambitious expansion plans, aiming to increase its retailer count to 100,000 by March 2025. This aggressive expansion strategy should further solidify its market presence and fuel future growth.
Order Book and Financial Performance
As of September 2024, HPL boasts an impressive order book of ₹1500+ crore, with 82% of these orders stemming from the metering products segment and 18% from the consumer and industrial segment. This diversified order book provides both stability and growth prospects in the near term.
In Q1FY25, HPL Electric delivered impressive financial results:
- Net sales surged by 25% year-on-year to ₹390 crore.
- Net profit skyrocketed by 159% year-on-year to ₹16 crore.
- EBITDA jumped 42% year-on-year to ₹54 crore.
These robust numbers highlight the company’s ability to capitalize on increasing demand and execute efficiently in its operations.
Fundamental Financial Analysis of HPL Electric
The provided chart showcases HPL Electric’s performance across several key metrics from March 2018 to March 2025 (predicted):
Sales, Net Profit & Operating Profit
- Sales: HPL Electric’s sales have steadily increased from ₹1,036 crore in March 2018 to a predicted ₹1,689.79 crore by March 2025.
- Operating Profit: The company’s operating profit has also grown significantly, projected to reach ₹220.16 crore in March 2025, up from ₹110 crore in March 2018.
- Net Profit: Similarly, net profit is expected to jump to ₹50.89 crore in March 2025, after a series of ups and downs over the years.
Operating Profit Margin (OPM):
HPL’s OPM has shown consistent improvement over the years, rising from 10.62% in March 2018 to 13.14% in March 2024, with a slight dip to 13.03% predicted for March 2025. This improvement in margins reflects the company’s ability to control costs while expanding its revenue base.
Earnings Per Share (EPS):
The company’s EPS is expected to grow significantly, reaching ₹7.83 in March 2025 from ₹4.27 in March 2018. This growth indicates better returns for shareholders over the coming years.
Return on Equity (ROE):
HPL’s ROE has shown a recovery after a dip in 2021. It is projected to rise to 6.11% in March 2025, a significant improvement from the 1.05% low in March 2022. This suggests that the company is becoming more efficient in generating profits from its equity base.
Asset Distribution:
The chart highlights that most of HPL’s assets are tied to other assets (₹1,403 crore), followed by fixed assets, which stands at ₹461 crore. CWIP(Capital Work In Progress) stands at ₹10 crore.
Liability Distribution:
The company has a relatively balanced liability distribution, with ₹627 crore in borrowings, ₹764 crore in reserves, and ₹419 crore in other liabilities. Its equity capital is valued at ₹64 crore, which indicates a conservative capital structure with a focus on long-term stability.
Stock Analysis and Future Predictions
Currently trading at ₹596 as on 13/09/2024, HPL Electric’s price-to-earnings (PE) ratio stands at 71.4, which is considerably higher compared to peers like Crompton Greaves and Havells India. Despite this higher valuation, HPL’s stock remains attractive due to its growth potential, particularly in light of the recent ₹144 crore smart meter order and other upcoming projects.
Short-Term Outlook (3 months)
- Target: ₹630-₹650
- Stop-loss: ₹570
Given the stock’s recent surge and momentum, a short-term target of ₹630-₹650 is feasible. However, cautious investors might want to set a stop-loss around ₹570 to mitigate potential risks, especially considering the stock’s recent volatility.
Long-Term Outlook
- Target: ₹700-₹750
- Stop-loss: ₹550
With a growing order book, expansion plans, and improving financial performance, HPL Electric has significant potential for long-term investors. A target of ₹700-₹750 is achievable within the next 12-18 months, assuming the company continues its current growth trajectory.
Conclusion
HPL Electric & Power Ltd is a well-established player in the Indian electrical equipment market with significant growth potential. The company’s dominant position in key product categories, strong order book, and expanding distribution network make it an attractive investment option. Despite trading at a higher PE ratio than its peers, HPL’s strong financial performance and recent order wins suggest that the stock has room for further growth. Investors should keep a close eye on the stock’s performance, especially in the wake of its recent ₹144 crore order for smart meters.
With solid fundamentals and a clear growth strategy, HPL Electric is well-positioned to capitalize on India’s growing demand for electrical products, making it a stock worth watching for both short-term traders and long-term investors.
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Disclaimer
The information provided in this article is for educational purposes only and should not be construed as financial or investment advice. Always consult with a professional financial advisor before making any investment decisions.
