HFCL Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from HFCL Limited (HFCL) Q2 FY23 Earnings Concall

Management Update:

• [00:05:16] HFCL said it’s well on its mission to double the export revenue during FY23. And this trend is also expected to continue in coming years.

• [00:13:03] HFCL believes its revenue and margins will continue to grow with all initiatives taken in last few quarters. HFCL added that it has also applied for incentive scheme for telecom and networking products, and are committed to invest INR425 crores over a period of 4 years.

Q&A Highlights:

• [00:15:36] Aman Vij of Astute Investment asked an update on the defense portfolio, what’s the orderbook for electronic fuses and electrical optical devices. Mahendra Nahata MD answered that electronic fuses have been sent to the army for testing and that work is going on. Revenues are expected to start from defense products only in the next financial year.

• [00:18:51] Aman Vij of Astute Investment asked about the market share of electronic fuse of $0.39 billion in FY25 and how much HFCL can gather and the bidders for it. Mahendra Nahata MD replied 3 private players are bidding for that. Numerically, HFCL expects about 20%, 25% market share.

• [00:26:21] Hardik Vyas with Economic Times asked if next year is going to be 5G-heavy in terms of execution, revenues and margins. Mahendra Nahata MD clarified that the company expects good amount of revenue to come from 5G and other telecom products HFCL has like routers and switches.

• [00:27:46] Sanjay Shah from KSA Securities asked about the rail network opportunity. Mahendra Nahata MD said that that’s an area where the company is doing good business. HFCL is implementing couple of networks abroad and in India HFCL is working on 6-7 different railway projects. HFCL expects reasonable revenue every year from rail networking of about INR500 crores.

• [00:32:56] Balasubramanian from Arihant Capital Markets enquired about R&D spend and how it’s going to be spent.  Mahendra Nahata MD answered that INR150 crores is the R&D expense of FY23. On the areas of spend of INR425 crores, part of that would be R&D and rest will be capital infrastructure.

• [00:39:28] Pranav Khandwala with Khandwala Securities asked about the HFCL Qualcomm opportunity. Mahendra Nahata MD replied that HFCL has done two agreements with Qualcomm; one of 5G Outdoor Small Cell and second of 5G Fixed Wireless Access Terminal. HFCL is going to design and manufacture 5G small cells for outdoor applications using the Qualcomm platform.

• [00:39:59] Pranav Khandwala with Khandwala Securities also asked about the order book. Mahendra Nahata MD replied that current order book is about INR5,300 crores, comprising of 55% government and 45% non-government orders.

• [00:46:10] Sahil Sanghvi from Monarch Networth enquired about the export order book.  Mahendra Nahata MD replied that of the current order book, export should be well over INR300 crores and largely OFC orders at this point of time.

• [00:58:31] Swapna Kamath of NFFO asked about the margins expected from the defense side, if it would be similar to ones in telecom products etc. Mahendra Nahata MD answered that the market is always competitive and the margins expected are similar to the telecom business, maybe 2-3% extra due to limited people entering the market.