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Himachal Futuristic wins Rs579cr order from BSNL

The order is part of BSNL’s plan to setup a 2G network in Assam to address the needs of 1,313 villages
Telecom equipment maker Himachal Futuristic Communications Ltd (HFCL) has won an order worth Rs579cr BSNL for building 2G network in Assam. The order covers the survey, planning, supply, installation, testing, commissioning, maintenance, and Operation & Maintainance activities for a period of five years for the 2G GSM BSS network. The network will be deployed in the villages of Karbi Anglong and Dima Haso districts of Assam. The network will include 924 base station sites and address the needs of 1,313 villages.

HFCL would see revenue CAGR of 12.2% over FY18-20E supported by (1) increased laying of optical fibre cable across the country and (2) growth in order book growth due to the increased contribution of defence and BSNL contracts. We expect PAT CAGR at 31.2% over FY18-20E with an EBITDA margin of 9.7% in FY20E. EBITDA margin is also expected to expand by 150bps over FY18-20E due to growth in the optical fibre cable segment. The stock is currently trading at 12.5x FY20E EPS.

HFCL is a manufacturer of optical fibre cable (OFC) and telecommunication equipment (~21% of 9MFY18 revenue). The company is also involved in the execution of EPC and turnkey contracts (~79% of 9MFY18 revenue). The order book for the company stood at ~Rs3,700cr at the end of 1HFY18. In March 2018, the company announced plans to spend Rs260cr on setting up an optical fibre manufacturing unit in Hyderabad. The unit will have a capacity of 6.4mn fibre kilometres, which would be expanded to 8mn fibre kilometres in the next phase.

Himachal Futuristic Communications Ltd is currently trading at Rs27.75 up by Rs0.75 or 2.78% from its previous closing of Rs27 on the BSE. The scrip opened at Rs27.90 and has touched a high and low of Rs27.90 and Rs27.50 respectively. The BSE group ‘A’ stock of face value Rs1 has touched a 52 week high of Rs36.65 on 11-Jan-2018 and a 52 week low of Rs11.85 on 30-Jun-2017. Last one week high and low of the scrip stood at Rs28.25 and Rs26.40 respectively.

The stock is currently trading below its 100 DMA.