HBL Power System Ltd - Rs 260.00
Founded in 1977, HBL Power Systems Ltd (HBL) is an acknowledged leader in design, development and manufacture of industrial & specialized batteries, allied electronic products and DC systems in India. DC power systems are used across the world for a variety of application where the traditional power supply system cannot be sustained/supported. It is specifically required in mobile (non-stationary) applications like rail coaches, aviation etc. Therefore company focuses mainly on five key sectors namely telecom, aviation, railways, defense and other industrial segment including oil & gas, power, petroleum, steel etc. In these applications the usage of conventional sources of power / electricity is not possible and DC power supplied thru batteries is to be relied upon. Notably, HBL offers a diverse portfolio of product which has been classified into following three segments
A. Batteries
HBL is a technology focused manufacturer of several ranges of specialized application batteries i.e. nickel cadmium (pocket, fibre, and sintered plate), lead acid (VRLA, Tubular, LMLA), silver oxide zinc, lithium, thermal, etc. Infact it is the market leader in VRLA (valve regulated lead acid) and NCPP (nickel cadium pocket plate) batteries and enjoys 50% market share of domestic telecom market. Moreover HBL is among the very few companies in the world making ultra high specialties batteries for military use like thermal, reserve and torpedo batteries. It also produces passenger and military aircraft batteries which are mainly for export. Notably, HBL is making a selective and focused entry to supply high quality pure lead tin batteries to the vehicles of road transport corporations. It is also working with manufacturers of electrical vehicles to design advanced technology batteries for these future products. To encourage use of green, non-polluting power fast growth is expected in the solar power and as each equipment based on solar power needs batteries to store and supply the power, the potential in this area is very substantial
B. Railway Electronics
Traditionally HBL has been supplying various batteries for train lighting, air conditioned coaches, locomotives, signaling and communications. But off late, company has designed and developed wide range of microprocessor based signaling products and power systems to cater to the needs of Indian Railways. It now offers integrated power supplies for railway stations and does turnkey signaling works contracts including design, installation and commissioning. It even has a dedicated division to execute end-to-end turnkey railway signaling works, starting from yard design, estimation, procurement, installation and commissioning. Company is now also working closely with IRISET, RDSO and other agencies to showcase and implement its other innovative electronics products like data loggers, automatic train charting systems, high frequency track circuits, solid state interlocks, digital axle counters, etc. In short this segment is expected to be the major growth driver in coming years, since the railways have embarked upon the modernization programmes of signaling systems all over the country in a phased manner.
C. Defence Electronics
HBL boasts of supplying several specialized, tailor made batteries to the Army, Navy and the Air Force. Infact it is most dependable supplier to defence for critical application areas like torpedoes, missiles, aircraft starting, ground power units etc. where no other major manufacturers can cater. Besides, HBL also deals in several electronic products which are used in defense sector like electronic warfare, radar, field telephone exchanges, electronic proximity, time fuzes, radio relays, laser weapon sights, night vision devices, opto electronics, thermal imagers, simulators, mine and grenade electronics etc. Unlike batteries and railway products where almost all development was done in house, HBL has collaborated with IAI - ELTA of Israel for most of the defence electronics products. Their joint venture has already bid for two defense contracts worth Rs 500 cr to be finalized at end of this calendar year.
Apart from above, HBL also manufactures other power electronics such as thyristor controlled rectifiers, earth leakage monitors, battery monitoring systems, industrial chargers, uninterrupted power systems, distribution boards etc. To meet the rising demand, HBL has been constantly expanding and modernizing its production facilities at Hyderabad, Manesar (Delhi) and Haridwar. Recently it has put up two new factories at Vizianagaram and SEZ Vizag in Visakhapatnam under a capex of Rs 150 cr. Ironically, HBL stands 3rd globally for Nicad Passenger aircraft batteries and ranks 2nd for industrial alkaline batteries. It derives nearly 15% of total revenue from exports to Europe, USA, Gulf, China, South East Asia etc. Incredibly, HBL has developed strengths in areas of limited competition and focused on direct marketing to chosen customers / market segments. The direct sales approach through a network of more than 10 branches in India with a growing team of sales and service engineers has enabled the company to own selected customers and become their preferred supplier.
Fundamentally as well as financially, HBL is on a strong footing and doing extremely well. For the nine months ending Dec 2007 it has recorded 100% growth in sales to Rs 688 cr whereas PAT zoomed up 125% to Rs 47.50 thereby surpassing the entire FY07 net profit of Rs 32 cr by huge margin. Accordingly it is expected to end FY08 with sales and NP of Rs 1000 cr and Rs 72 cr respectively. This works out to an EPS of Rs 30 on equity of Rs 24.30 cr. Hence scrip is currently trading at a P/E ratio of less than 9x times against its FY08 earnings. At a reasonable discounting by 14x times share price can touch Rs 425 (i.e. 60% return) in 12~15 months. Moreover with cooling of nickel and lead price HBL’s margin is expected to improve a bit going forward and accordingly it is estimated to post an EPS of more than Rs 40 for FY09. To conclude investors are strongly recommended to buy at current levels and add at every decline. A solid bet.
A. Batteries
HBL is a technology focused manufacturer of several ranges of specialized application batteries i.e. nickel cadmium (pocket, fibre, and sintered plate), lead acid (VRLA, Tubular, LMLA), silver oxide zinc, lithium, thermal, etc. Infact it is the market leader in VRLA (valve regulated lead acid) and NCPP (nickel cadium pocket plate) batteries and enjoys 50% market share of domestic telecom market. Moreover HBL is among the very few companies in the world making ultra high specialties batteries for military use like thermal, reserve and torpedo batteries. It also produces passenger and military aircraft batteries which are mainly for export. Notably, HBL is making a selective and focused entry to supply high quality pure lead tin batteries to the vehicles of road transport corporations. It is also working with manufacturers of electrical vehicles to design advanced technology batteries for these future products. To encourage use of green, non-polluting power fast growth is expected in the solar power and as each equipment based on solar power needs batteries to store and supply the power, the potential in this area is very substantial
B. Railway Electronics
Traditionally HBL has been supplying various batteries for train lighting, air conditioned coaches, locomotives, signaling and communications. But off late, company has designed and developed wide range of microprocessor based signaling products and power systems to cater to the needs of Indian Railways. It now offers integrated power supplies for railway stations and does turnkey signaling works contracts including design, installation and commissioning. It even has a dedicated division to execute end-to-end turnkey railway signaling works, starting from yard design, estimation, procurement, installation and commissioning. Company is now also working closely with IRISET, RDSO and other agencies to showcase and implement its other innovative electronics products like data loggers, automatic train charting systems, high frequency track circuits, solid state interlocks, digital axle counters, etc. In short this segment is expected to be the major growth driver in coming years, since the railways have embarked upon the modernization programmes of signaling systems all over the country in a phased manner.
C. Defence Electronics
HBL boasts of supplying several specialized, tailor made batteries to the Army, Navy and the Air Force. Infact it is most dependable supplier to defence for critical application areas like torpedoes, missiles, aircraft starting, ground power units etc. where no other major manufacturers can cater. Besides, HBL also deals in several electronic products which are used in defense sector like electronic warfare, radar, field telephone exchanges, electronic proximity, time fuzes, radio relays, laser weapon sights, night vision devices, opto electronics, thermal imagers, simulators, mine and grenade electronics etc. Unlike batteries and railway products where almost all development was done in house, HBL has collaborated with IAI - ELTA of Israel for most of the defence electronics products. Their joint venture has already bid for two defense contracts worth Rs 500 cr to be finalized at end of this calendar year.
Apart from above, HBL also manufactures other power electronics such as thyristor controlled rectifiers, earth leakage monitors, battery monitoring systems, industrial chargers, uninterrupted power systems, distribution boards etc. To meet the rising demand, HBL has been constantly expanding and modernizing its production facilities at Hyderabad, Manesar (Delhi) and Haridwar. Recently it has put up two new factories at Vizianagaram and SEZ Vizag in Visakhapatnam under a capex of Rs 150 cr. Ironically, HBL stands 3rd globally for Nicad Passenger aircraft batteries and ranks 2nd for industrial alkaline batteries. It derives nearly 15% of total revenue from exports to Europe, USA, Gulf, China, South East Asia etc. Incredibly, HBL has developed strengths in areas of limited competition and focused on direct marketing to chosen customers / market segments. The direct sales approach through a network of more than 10 branches in India with a growing team of sales and service engineers has enabled the company to own selected customers and become their preferred supplier.
Fundamentally as well as financially, HBL is on a strong footing and doing extremely well. For the nine months ending Dec 2007 it has recorded 100% growth in sales to Rs 688 cr whereas PAT zoomed up 125% to Rs 47.50 thereby surpassing the entire FY07 net profit of Rs 32 cr by huge margin. Accordingly it is expected to end FY08 with sales and NP of Rs 1000 cr and Rs 72 cr respectively. This works out to an EPS of Rs 30 on equity of Rs 24.30 cr. Hence scrip is currently trading at a P/E ratio of less than 9x times against its FY08 earnings. At a reasonable discounting by 14x times share price can touch Rs 425 (i.e. 60% return) in 12~15 months. Moreover with cooling of nickel and lead price HBL’s margin is expected to improve a bit going forward and accordingly it is estimated to post an EPS of more than Rs 40 for FY09. To conclude investors are strongly recommended to buy at current levels and add at every decline. A solid bet.
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