HBL Power soars 8%, hits new high on healthy outlook; up 208% in 6 months

CARE Ratings expects total operational income of HBL to grow over 25% YoY (backed by strong demand) in FY24 along with sustaining its operating margins.

Shares of HBL Power Systems hit a record high of Rs 309.80, as they rallied 8 per cent on the BSE in Wednesday’s intra-day trade on healthy business outlook. The stock of auto components & equipments company surpassed its previous high of Rs 294.90 touched on August 24, 2023.

In past six months, the stock price of HBL Power has zoomed 208 per cent, as compared to nearly 11 per cent rise in the S&P BSE Sensex.

The principal activities of the HBL Power comprise of manufacturing of different types of batteries including lead acid, nicad, silver zinc, lithium and railway and defence electronics and other products. The company is also engaged in service activities related to the above products.

For April-June quarter (Q1FY24), HBL Power had reported robust earnings, with its consolidated profit after tax more-than-doubled to Rs 51.51 crore from Rs 19.98 crore in Q1FY23. Revenue from operations jumped 46 per cent to Rs 467 crore from Rs 320 crore in a year ago quarter.

The Battery vertical is one of the major revenues spinners for the company followed by Electronics segment. The company is one of the largest manufacturers of Ni-Cad batteries which has diverse industrial applications. HBL has also started focussing on electronic and engineering products for the defence and railways.

In the Union Budget 2023-24, an allocation of Rs 2.40 lakh crore was been provided to the railway sector for accelerating the growth of the Indian Railways by improving infrastructure and introducing high-speed trains, which would call for increased TCAS deployment.

Considering these factors, Kavach TCAS garners the greatest attention in the directional focus for FY24. The management said the company aim to supply and install Kavach systems in 23 Vande Bharat Trainsets.

HBL Power partnered with Hindustan Aeronautics (HAL) Kanpur to develop batteries for civil aircraft Hindustan D0-228 and with HAL, Bangalore for Light Compact Aircraft - Tejas, and Advanced Light Helicopters, as part of the Atmanirbhar Bharat and Make in India initiatives. Parallelly, the company is working with the Ministry of Aviation and the Director General of Civil Aviation (DGCA) to deploy NCSP batteries in all civil aircraft flying in India under the Atmanirbhar Bharat initiatives. When this happens, maybe a few years into the future, it will open an interesting growth window for the HBL.

The company said it witnessed strong demand from telecom sector due to 5G rollouts. Telecom players are back, investing aggressively in creating telecom infrastructure. Credible estimates suggest that telecom players will add another 4.5 Lakh towers to improve latency and quality 5G coverage. Moreover, 5G consumes more power than 4G. Hence, the connected battery capacity will be higher for a given backup requirement. Moreover, the replacement opportunity is also expected to be promising, HBL said in FY23 annual report.

Meanwhile, in August, the rating agency CARE Ratings revised the outlook of HBL from ‘Stable’ to ‘Positive’ on account of significant improvement in the revenue and profits demonstrated by HBL in Q1FY24 besides achieving a steady financial and operational growth during FY23.

Backed by healthy demand, the total operating income (TOI) of HBL is expected to improve further in coming quarters. The ratings also derive strength from its healthy orderbook from reputed clientele that provides medium-term revenue visibility, strong financial risk profile and favourable industry growth prospects, CARE Ratings said in its rating rationale.

CARE Ratings expects TOI of HBL to grow over 25 per cent year-on-year (backed by strong demand) in fiscal 2024 along with sustaining its operating margins and maintaining a healthy financial risk profile. The outlook may be revised to stable if the company achieves less-than-expected revenue and profitability, going forward.