Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HFCL Ltd (BOM:500183, Financial) has launched two new unlicensed band radio products, enhancing its portfolio in wireless backhauling solutions.
- The company has successfully deployed one of the world's largest advanced broadband network gateways for BSNL, boosting network efficiency.
- HFCL Ltd (BOM:500183) is expanding its international presence with a new subsidiary in the UK, aiming to increase export revenue significantly.
- The company has been exempted from anti-dumping duties on optical fiber cable by the European Commission, providing a competitive edge in Europe.
- HFCL Ltd (BOM:500183) is focusing on defense technology, with significant partnerships and product developments, including a collaboration with General Atomics Aeronautics Systems.
Negative Points
- The global fiber optic cable market has been depressed, impacting HFCL Ltd (BOM:500183)'s revenue from this segment.
- The company's profit after tax for Q2 FY25 decreased compared to Q1 FY25, indicating financial pressure.
- There is a delay in the BharatNet Phase III project, affecting potential revenue from this significant opportunity.
- HFCL Ltd (BOM:500183) faces high revenue concentration, with over 60% of revenue coming from its top three or four customers.
- The company's guidance for 25% to 30% revenue growth is challenged by the sluggish fiber optic cable market.
Q & A Highlights
Q: What is the completion timeline for the INR6,151 crore order book, and why was there less execution in Q2? Can we expect a ramp-up in the next quarter?
A: The INR6,151 crore order includes INR1,500 crore to INR1,800 crore for O&M over the next five to six years, with the remaining INR4,000 crore to be executed in 12 to 18 months. The fiber optic cable market has been depressed globally, affecting revenue. However, signs of recovery are emerging, and growth is expected to return in the next quarter. (Mahendra Nahata, Managing Director)
Q: What is the size of the opportunity for HFCL in the BharatNet and BSNL projects, and when can we expect significant international orders?
A: BharatNet presents an opportunity of around 20 lakh kilometers of fiber optic cable, translating to approximately INR20,000 crore. For private operators, the opportunity is INR700 crore to INR800 crore annually. Internationally, the market is expected to recover to 350 million fiber kilometers. HFCL is focusing on the European and US markets, with significant demand expected from Q4 FY25. (Mahendra Nahata, Managing Director)
Q: What are the margin expectations for HFCL in the short and medium term?
A: In the short term, margins are expected to remain similar to the first two quarters of FY25. In the medium term, as product revenue increases and backward integration projects are completed, margins should improve. (Mahendra Nahata, Managing Director)
Q: What is the current capacity utilization for fiber optic cables, and what are the signs of market revival?
A: Current capacity utilization is about 45%, expected to improve to 80% or more in the next quarter. Revival signs include increased inquiries and RFPs from both international and local customers, indicating higher demand projections. (Mahendra Nahata, Managing Director)
Q: Can you provide an update on the BharatNet Phase III project and HFCL's expected market share?
A: BharatNet Phase III has a total CapEx of INR65,000 crore, with HFCL expecting a market share of INR5,000 crore to INR8,000 crore. The project is in the advanced stage of technical evaluation, with contracts expected to be awarded by the beginning of the next quarter. (Mahendra Nahata, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
