Sector: Telecom & Networking
5-Year Return: Over 600%
Current Market Price (CMP): ₹75
Quarterly Revenue (Dec 2024): ₹1,032 Cr
Quarterly Net Profit (Dec 2024): ₹73.7 Cr
Revenue Growth YoY: -4.4%
Net Profit Growth YoY: -10.4%
Operating Profit Margin: 15.01%

HFCL Ltd., a major player in the Indian telecom sector, has had an impressive multibagger return of over 600% in the last five years. However, its most recent quarterly results show a bit of a slowdown, especially with a decline in both revenue and net profit. Despite these short-term challenges, HFCL remains a company to watch, given its long-term potential in the rapidly evolving telecom and networking industry.

Quarterly Financial Performance:

• Revenue: ₹1,032 Cr (-4.4% YoY)
• Operating Profit: ₹151.9 Cr (Operating Profit Margin: 15.01%)
• Net Profit: ₹73.7 Cr (-10.4% YoY)

Key Highlights:

1. Revenue Decline: HFCL’s Q3 FY25 results saw a decrease in revenue of 4.4% YoY. This decline could be attributed to the cyclical nature of the telecom industry and possible short-term challenges in order book growth.
2. Profitability Under Pressure: Despite a strong operating profit margin of 15.01%, HFCL’s net profit showed a 10.4% decline YoY. However, it’s worth noting that the company remains profitable and continues to generate healthy operating profits.
3. Improved Operating Margin: The operating profit margin of 15.01% in Q3 is a solid achievement, particularly in an industry where margins can often fluctuate due to external factors such as raw material prices and regulatory changes.
4. Consistent Cash Flow: Despite some fluctuations in quarterly performance, HFCL continues to generate positive net profit, and its TTM (Trailing Twelve Months) net profit of ₹368.9 Cr showcases its overall resilience.
5. EPS Performance: The adjusted EPS for Q3 FY25 stands at ₹0.5, and the TTM EPS is ₹2.6, which reflects a steady income-generating potential for investors. The earnings are on an upward trajectory compared to previous years.

Outlook for HFCL Ltd.:

HFCL’s long-term prospects remain strong, particularly in the telecom and networking sector, which is poised for growth as India continues to expand its digital infrastructure. While short-term results have shown some volatility, HFCL’s solid operating profit margin, cash flow, and history of growth make it a potentially strong pick for long-term investors.

Conclusion:

Despite some recent dips in revenue and profit, HFCL Ltd. remains a promising telecom stock with significant long-term potential. Investors looking to tap into India’s growing telecom and networking sector might find HFCL attractive at its current valuation of ₹75. As the company navigates through short-term challenges, its solid financial base and established position in the market suggest it could be poised for another round of growth in the future.