HPL Electric and Power: Strong Growth Prospects and Favorable Outlook Drive Stock Surge

HPL Electric and Power: Strong Growth Prospects and Favorable Outlook Drive Stock Surge

VoM News Desk | January 2, 2024 | 03:34 PM IST | Breaking News | Follow on Google News

HPL Electric and Power: Strong Growth Prospects and Favorable Outlook Drive Stock Surge

HPL Electric and Power: Strong Growth Prospects and Favorable Outlook Drive Stock Surge

HPL Electric & Power continued its impressive run on the stock market, marking its fifth consecutive trading day with a remarkable 5% surge, achieving an all-time high of ₹287.20 per share. This surge, contributing to a cumulative five-day gain of 37%, follows positive sentiments stemming from an upbeat analysis by domestic brokerage firm ICICI Direct Research.

The company, a prominent player in India’s electric equipment manufacturing sector, operates in two significant segments: ‘metering & systems’ and ‘consumer & electrical’. In the ‘metering & systems’ segment, which largely caters to institutional and B2B markets, HPL specializes in manufacturing smart and conventional meters. Conversely, the ‘consumer & electrical’ segment, predominantly catering to B2C markets, involves three sub-segments: switchgear, LED lighting, and wires & cables.

ICICI Direct Research emphasizes that HPL Electric & Power is well-positioned to benefit significantly from the burgeoning ‘Smart Meters’ opportunity. With the Indian government aiming to install 25 crore smart meters nationwide to bolster the transmission & distribution network and curb distribution losses, the company stands to capitalize on this growth driver.

The brokerage notes HPL’s dominant market position in the domestic electric meters market, holding a 20% market share with an annual meter capacity of 11 million units. The company boasts an order backlog of over ₹2,000 crore, with a substantial 70% contribution from smart meters, ensuring robust medium-term revenue visibility.

Highlighting HPL’s robust manufacturing capabilities and extensive product portfolio encompassing various low-voltage electrical products, ICICI Direct Research forecasts a 20% revenue CAGR over FY23–26E, amounting to ₹2,166 crore in FY26E. Anticipating a gradual EBITDA margin improvement to 15% by FY26E, the brokerage estimates an EBITDA CAGR of 28% over FY23–26E, reaching ₹329.3 crore in FY26E, up from ₹156.9 crore in FY23.

With optimistic growth projections and favorable market positioning, the brokerage recommends a ‘buy’ rating on HPL Electric & Power’s stock, setting a target price of ₹305 apiece, based on 18x FY26E EPS.

VoM News Desk

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