Shares of HFCL Limited were locked in a 5 per cent upper circuit after the company bagged an order amounting to Rs 287.96 crores from RailTel Corporation of India Limited for setting up Secured Optical Packet Switched Network for defense forces. The stock has been gaining for the last three trading sessions and has delivered 10.41 per cent return during the period.
“The Secured Optical Packet Switched Network shall enhance the security of applications and provide latest state of the art technology, which will drive the security requirement of defense forces,” the company said.
The stock ended 4.98 per cent higher at Rs 79 on the BSE. Market cap of the firm rose to Rs 10,185.56 crore. The share stands higher than the 5 day, 10 day, 20 day, 50 day, 100 day, and 200 day moving averages. It has gained 351 per cent in the last 12 months and has risen 207 per cent since the beginning of this year.
ICICI Securities initiated coverage on the stock. The brokerage house believes HFCL is well poised to grow at a healthy pace given the opportunities in optical fibre/optical fibre cables, telecom and networking, defence, railways and security and surveillance segments.
The company (formerly Himachal Futuristic Communications Limited) is a technology enterprise engaged in manufacturing high-end transmission and access equipment, optical fiber, optical fiber cables (OFC). It specialises in setting up a modern communication network for telecom service providers, railways, defence, smart city, and surveillance projects.
“We value HFCL at Rs92/share (13x FY24E EV/EBITDA). The ascribed valuation is at a premium to global infrastructure peer group and at a slight premium to the global networking peer group. The increase in product portfolio that HFCL targets to achieve in the next 2-3 years and the significant growth opportunity that we see are two key reasons for ascribing the premium,” the brokerage house said.
“We also see scope for improvement in the return ratios in the ensuing period. Export opportunity, if captured, can lead to further expansion in the topline in years to come,” it added.
According to MarketsMojo, the company has declared positive results for the last three consecutive quarters and has a strong ability to service debt as the company has a low debt to EBITDA ratio of 1.18 times.
The stock is trading at a fair value compared to its average historical valuations and with ROCE of 20.2, it has an attractive valuation with a 4.2 enterprise value to capital employed.
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