Stock of this consumer electronics firm has zoomed over 200% in 10 months

The stock of HPL Electric & Power hit a new high of Rs 273.55, and was trading higher for the fourth straight day on Monday

Shares of HPL Electric & Power (HPL) were locked in the upper circuit of 10 per cent at Rs 273.55, also its record high, with only buyers being seen on the counter. A combined 1.97 million equity shares changed hands and there were pending buy orders for 350,000 shares on the NSE and BSE at 12:38 PM.

The stock of the consumer electronics company was trading higher for the fourth straight day, having surged 30 per cent during the period. In the past 10 months of the financial year 2023-24, the market price of HPL Electric has jumped over three-times,  zooming 224 per cent on strong business outlook.

HPL is an established electric equipment manufacturing company in India, manufacturing a diverse portfolio of electric equipment, including metering solutions, switchgear, lighting equipment and wires and cables, catering to consumer and institutional customers in the electrical equipment industry.

HPL is among India's leading electric equipment manufacturer with a formidable presence across two major segments, metering and systems (which contributed 53 per cent of total revenues as of FY23), and the balance 47 per cent by consumer & industrials.

The company maintains a strategic direction towards sustainable growth, in line with India's gradual adoption of advanced metering solutions, contributing to consistent high value creation.

Last month, HPL announced that it had won smart meter orders worth Rs 545 crore from various prestigious customers in the normal course of business.

According to CRISIL Ratings, sales from smart meters are expected to grow, aided by the government's focus on this segment. The group is focusing on increasing its sales share from smart meters over the medium term, and hence, the operating margin is expected to improve to more than 13 per cent aided by stable commodity prices.

"Improvement in the business risk profile resulted in a better financial risk profile. Networth was strong at Rs 795 crore as on March 31, 2023, backed by healthy accretion to reserve, and is expected to rise over Rs 830 crore in fiscal 2024," the rating agency said in its rationale.

Meanwhile, the operating margin of the group improved 100 bps to 13.5 per cent in the September quarter (Q2FY24) from 12.5 per cent in Q2FY23.

The management said the company has positioned itself very well in the smart meter market, and is receiving good traction from customers. The current meter order book has 85 per cent Smart Meters and it is expected to rise even further. Smart Meters attract higher realisations, thereby resulting in increased revenue and enhanced profitability.

"Overall, there is positive performance in the Consumer & Industrial segment with growth in switchgear and wire & cables. However, lighting faced value erosion as an industry-wide phenomenon, leading to price reductions and mild sales impact," the management said.

Analysts at ICICI Securities believe that the 'Metering & Systems' segment will be the key growth driving segment for HPL in the coming period. The Government is targeting installation of 25 crore smart meters nationwide with an ambition of firming transmission & distribution network, and reducing the distribution losses.

"With an annual meter capacity of 11 million units (Utilisation at 70- 75 per cent), HPL already commands the market leader position in domestic electric meters market with ~20 per cent market share. The company's order backlog stands at over Rs 2,000 crore (70 per cent plus is contributed by smart meters) as of November, 2023 (1.5x TTM revenues), ensures medium term revenue visibility," the brokerage firm said in its stock update.

"HPL is well positioned to witness healthy growth led by strong demand arising in smart meters segment. Moreover, switchgear & wire & cable segments too is poised to grow considerably in the coming period. We estimate revenue, Ebitda, and PAT to grow at 19.7 per cent, 28 per cent, and 53 per cent CAGR, respectively over FY23-26E as against single digit growth over FY20-23," the analysts said with a 'buy' rating on the stock and a target price of Rs 305 per share.