HFCL Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from HFCL Limited (HFCL) Q4 FY22 Earnings Concall

Q&A Highlights:

• Sanjay Shah of KSA Securities asked about the opportunities for the company in FY23 and FY24. Mahendra Nahata MD replied that FY23 comes up with multiple opportunities in India and worldwide. With 5G coming probably in June, there will be large demand for fiberoptic cable and wideband backhaul radios.

• Sanjay Shah of KSA Securities also enquired about the progress on the defense equipment side. Mahendra Nahata MD answered that defense equipment, whatever design HFCL has finished, they are undergoing trial. Also government’s plan to indigenously procure defense equipment would help HFCL a great deal in its business.

• Saral Seth from Indsec Securities enquired about the R&D development in the 5G area. Mahendra Nahata MD answered that HFCL has two kind of equipment; 5G radios and transport equipment. HFCL added that the designs of small cells and macro cells are progressing very well. Tentatively, these products in FY23 will start to come to showcasing to the customers. So it’s progressing well.

• Saral Seth from Indsec Securities enquired about the growth outlook for the optical fiber industry and its impact on HFCL. Mahendra Nahata MD answered that demand for optical fiber cable increase is coming once 5G new network will be laid out. Huge opportunity is coming up along with increased exports to different countries for backhaul, backbone and FTTH applications. So massive expansion is taking place at a cost of more than INR400 crores to take care of the demand opportunity.

• Saket Kapoor from Kapoor & Company asked that out of the total order book how much is skewed towards the export part. Mahendra Nahata MD replied that export orders are always coming in bits and pieces. The company added that it has INR225 crores of order in hand which is a good number looking at the current export target.

• Saket Kapoor from Kapoor Company asked about the capex for FY22, including the maintenance capex and capex target for FY23. Mahendra Nahata MD said the FY23 capex target is about INR500 crores, including R&D. For FY22, the total capex and R&D would have been INR125 crores or so.

• Saket Kapoor from Kapoor Company also asked about the net debt level and the cost of funds. V.R. Jain CFO said it is INR730 crores net debt as against INR920 crores for last year, after raising INR600 crores capital raising exercise.

• Saket Kapoor from Kapoor Company enquired about the other expenses going up, in commensurate to the turnover. V.R. Jain CFO answered that this has increased because of the logistics cost and also R&D expense had an excess of about INR5 crores and HFCL had written off some of the debt of INR2.5 crore.

• Saket Kapoor from Kapoor Company asked the reason for de-growth in revenue on the Turnkey Contracts and Services segment. Mahendra Nahata MD replied that it is HFCL’s strategy. As stated, HFCL’s revenue from products will go up and from EPC will go down going forward. And as can be seen product revenue from 27% has gone up to 43%.

• Abhijit Mitra of ICICI Securities asked about product revenue for 4Q and FY22, how much of it was contributed by fiber optic cable. Mahendra Nahata MD said for FY22, the total revenue was INR2,055 crore for exports, out of which INR1,700 odd crores is by optical fiber cable and balance is by different products.