HFCL - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 2.9
| Stock Code | HFCL | Market Cap | 10,083 Cr. | Current Price | 65.8 ₹ | High / Low | 105 ₹ |
| Stock P/E | 404 | Book Value | 27.7 ₹ | Dividend Yield | 0.15 % | ROCE | 7.90 % |
| ROE | 5.00 % | Face Value | 1.00 ₹ | DMA 50 | 67.0 ₹ | DMA 200 | 76.7 ₹ |
| Chg in FII Hold | 0.00 % | Chg in DII Hold | -4.50 % | PAT Qtr | 61.4 Cr. | PAT Prev Qtr | -42.3 Cr. |
| RSI | 50.8 | MACD | -0.49 | Volume | 1,33,13,154 | Avg Vol 1Wk | 2,33,95,143 |
| Low price | 59.8 ₹ | High price | 105 ₹ | PEG Ratio | -34.5 | Debt to equity | 0.34 |
| 52w Index | 13.3 % | Qtr Profit Var | -18.0 % | EPS | 0.17 ₹ | Industry PE | 14.6 |
💹 Core Financials: HFCL shows weak profitability with ROE at 5.0% and ROCE at 7.9%, reflecting limited efficiency. Debt-to-equity ratio of 0.34 is moderate, but manageable. Quarterly PAT of ₹61.4 Cr. improved from a loss of ₹-42.3 Cr., yet profit variation at -18% indicates inconsistency. Dividend yield of 0.15% is negligible, offering minimal shareholder returns. EPS at ₹0.17 highlights weak earnings power.
📊 Valuation Indicators: Current P/E of 404 is extremely high compared to industry average of 14.6, suggesting severe overvaluation. Book value of ₹27.7 against CMP of ₹65.8 implies a P/B ratio of ~2.37, which is reasonable but overshadowed by poor earnings. PEG ratio of -34.5 indicates negative growth prospects relative to valuation. Intrinsic value appears significantly lower than CMP, pointing to stretched valuations.
🏢 Business Model & Competitive Advantage: HFCL operates in telecom infrastructure, optical fiber cables, and defense communication systems. Its competitive advantage lies in government contracts and niche product offerings. However, profitability remains under pressure due to high competition, low margins, and dependency on project-based revenues.
💰 Entry Zone Recommendation: Considering DMA 50 at ₹67 and DMA 200 at ₹76.7, the stock is trading below long-term averages, showing weakness. A favorable entry zone would be ₹55–₹60 if fundamentals improve. Current levels remain risky due to stretched valuations and weak earnings.
📈 Long-Term Holding Guidance: HFCL remains a speculative play with inconsistent profitability and extremely high valuations. Long-term investors should be cautious and only consider holding if earnings stabilize. Fresh entries should wait for significant correction and improved fundamentals.
Positive
- Improved PAT from a loss of ₹-42.3 Cr. to ₹61.4 Cr.
- Debt-to-equity ratio of 0.34 is manageable.
- Presence in telecom and defense communication sectors.
Limitation
- ROE (5.0%) and ROCE (7.9%) are weak.
- P/E ratio (404) is extremely high compared to industry average (14.6).
- Dividend yield of 0.15% offers negligible income.
- Profit variation (-18%) shows inconsistency.
Company Negative News
- Decline in DII holdings (-4.50%) signals reduced domestic institutional confidence.
- Stock trading below DMA 200 indicates long-term weakness.
Company Positive News
- Quarterly PAT turned positive compared to previous loss.
- Stable FII holdings (0.00%) show neutral foreign investor sentiment.
- Strong presence in government contracts and telecom infrastructure projects.
Industry
- Telecom infrastructure industry benefits from 5G rollout and digital expansion.
- Industry P/E at 14.6 suggests peers trade at much lower valuations.
- High competition and margin pressures remain challenges.
Conclusion
⚖️ HFCL is a speculative stock with weak profitability, inconsistent earnings, and extremely high valuations. While government contracts provide opportunities, fundamentals remain fragile. Long-term investors should be cautious, and new investors should wait for corrections towards ₹55–₹60 and improved earnings before entry.
Would you like me to also prepare a peer comparison HTML snippet against Sterlite Technologies and Tejas Networks to highlight relative strengths and weaknesses in the telecom infrastructure space?