Multibagger HFCL stock surges 10% as European Commission exempts the company from anti-dumping duties

The defence sector contributed 6% to its revenue in FY24, with telecom accounting for 92% and railways contributing the remaining 2%.

HFCL (Himachal Futuristic Communications Limited), a company with diverse operations in telecom infrastructure, has experienced a remarkable surge in its stock value during today's early trade after the company on Monday said it is the only Indian optical fiber cable manufacturer to have been exempted from anti-dumping duties by the European Commission.

Highlighting a decision by the European Commission on June 14, 2024, HFCL said: In the said decision, it was determined that HFCL is the only Indian company not engaged in the dumping of OFC in European markets, whereas provisional anti-dumping duty has been determined on all other Indian optical fiber cable manufacturers in the statement issued by the European Commission. This makes HFCL the only Indian optical fiber cable manufacturer to have been exempted from anti-dumping duties by the European Commission."

The company has been operating in Europe for over a decade and has long-term engagements with some of the leading telcos and ISPs in many countries in Europe.

Following this positive development, the company's shares opened today's session with a 5% gap up at ₹121 apiece, compared to the previous day's close of ₹117, and continued to strengthen, reaching ₹129, marking a notable increase of 10.25%.

Today's rally marks the ninth consecutive day of gains for the stock, during which it has surged by 52%. Over the past three years, the company's shares have appreciated by 139%, and over the last five years, they have seen a remarkable rally of 525%.

Recent developments

In a strategic move aimed at enhancing national security and bolstering its presence in the defence sector, HFCL has significantly ramped up its research and development efforts over the past five years.

This investment has enabled the company to build a robust portfolio of proprietary defence products with high national and international demand. The company is also actively developing drone detection radars to further expand its defence offerings.

In May, HFCL announced the successful creation of a state-of-the-art defence product portfolio, which are not only of national importance but also have huge demand for export.

The company has also achieved a significant milestone by clearing the User Trial Readiness Review for the armament upgrade project of the Indian army's BMP infantry combat vehicles. This accomplishment underscores HFCL's capability to meet stringent defence sector requirements and positions it as a reliable partner for defence procurement.

HFCL’s subsidiary HTL Limited has already received orders from various Defence PSUs for supply of Wire Harness for application in Tanks, Ships, Aircrafts and in several other equipment, according to the company's May filing.

The defence sector contributed 6% to its revenue in FY24, with telecom accounting for 92% and railways contributing the remaining 2%. HFCL maintains a dominant market share in optical fiber cable (OFC) supplies and is recognized as one of India's largest manufacturers of Wi-Fi access points and Unlicensed band radios.

Future outlook

The company has set ambitious targets to achieve by 2027, focusing on substantial growth in revenue, profitability, and market presence. With a strategic roadmap in place, it aims to reach a revenue range of ₹9,000–10,000 crore by enhancing operational efficiencies and expanding its market reach.

Key strategic initiatives include advancing its technology prowess in the telecommunications sector, particularly in 5G and 6G products, to capitalize on emerging market demands.

To drive revenue diversification and profitability, the company is shifting its revenue mix from project-led to product-led, which is expected to streamline operations, reduce working capital needs, accelerate revenue realization, and expand profit margins.

The establishment of subsidiaries in key global markets like the USA, Canada, and the Netherlands underscores its commitment to enhancing global market penetration and product marketing capabilities.

Additionally, plans for an upcoming optical fiber cable (OFC) manufacturing facility in Poland are geared towards strengthening its footprint in Europe, further supporting its growth strategy. The company also aims to capitalize on the strong demand from global telecom service providers, leveraging its technological innovations and market expertise.

In parallel, the company is strategically targeting the Defence segment, aiming to secure 10-15% of its total revenues from this sector by FY27. This strategic focus includes pursuing both domestic and international opportunities within the Defence sector, aligning with broader initiatives to bolster revenue streams and achieve sustainable growth targets.

HFCL, a leading technology enterprise specializing in the manufacturing of high-end telecom equipment, optical fiber, and optical fiber cables, as well as providing communication network solutions for the telecommunications, defense, and railway sectors, has strengthened its position in the defense sector with the development of cutting-edge defense electronic products.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.