INSUBCONTINENT EXCLUSIVE:
By Arun Mukherjee Soumya Malani (Kolkata’s Arun Mukherjee, and Soumya Malani have come to be known as smallcap aficionados in India’s
They would show up at most AGMs, visit the remotest factories of a company and go chasing end-users to understand their experiences with a
product in their passionate hunt for good smallcaps
Soumya and Arun would be sharing their experiences with companies and from the ground in this space every now and then
Keep watching)HBL Power has brought in a new independent director, M Chandra Mohan, on board, who has worked with PG USA and has good
experience in the field of marketing
He is very much excited in the opportunities in TCAS (train collision advance system) and TMS (train management system).
1) The AGM started
with the promoter describing the past performance and how the government has taken some significant decisions, which are helping Indian
companies.
2) Previously, very few TCAS (train collision advance system) and TMS (train management system) solutions were being implemented
by Indian Railways, and they were majorly imported
Now, the government has decided to encourage domestic industries.
3) Margins in TCAS and TMS businesses are lucrative and the company is not
going to bid for any orders with less than 20% Ebidta.
4) The company is expecting Rs 150-200 crore turnover from TCAS and TMS solutions in
FY20 with 20 per cent Ebidta margins on a conservative basis (which forms almost 70% of entire net profit of FY18).
5) The company’s
defence vertical has secured all necessary approvals for manufacturing Rockets and other ammunition
The company has bid for a 10-year order and chances of securing the order are very high
The company is expecting Rs 150 crore turnover from this new defence vertical with 20% Ebidta margins from FY21.
6) FY19 will be similar to
Not much improvement is expected in topline
But they are trying to improve bottomline with some cost cutting measures.
7) The company is venturing into e-mobility as the next strategic
It plans to develop and offer complete drive train solutions comprising motors, controllers, batteries and battery chargers.
8) Its plan is
to collaborate with leading Logistic services companies and replace their old trucks diesel engines with their new drive train set
comprising motor, controller and battery and charger.
9) The company had already developed a prototype for this and is being tested with
some trucks.
10) The promoters are very clear that they don’t want to enter into cars, as this type of system is beneficial for vehicles
travelling 10,000km per month and improves their efficiency and reduces the logistic companies cost.
11) The promoter also cited the example
of KPIT Promoters, which burnt Rs 150 core in Pune by trying this for cars
As this is not fit for cars.
12) The promoter seems to have good knowledge of government policies and the business
And they want to do the right things.
13) The company will be having a capex for their defence vertical and then establishing a new LI-Ion
battery factory for their E-Mobility vertical in the next 3 years.
14) The promoter has confidently said that debt to equity will not exceed
1 under any circumstances.
15) The TCAS and TMS turnover is likely to touch Rs 200 crore in FY20
The company is confident that there is huge potential in that vertical and double that revenue from that division for every year for next 2
The problem is that delivery should be faster.
16) The company is going to borrow Rs 50 crore this year and not going to borrow more than Rs
200 crore over next three years and will maintain the debt under control.
17) The government is paying the company in 30 days for the
revenue contracts for other orders the maximum time is 3 months
There is no problem with receivables for the company.
18) The company will start booking the new defence vertical revenues 24 months from
It should be around Rs 150 crore per year for next 10 years
19) The company is slowly planning to increase the non-battery vertical revenue
to 40% of total revenue from currently 20%, which will increase their Ebidta and NPMs in next 3 years
As the telecom tower battery space has become extremely competitive and companies like JIO are importing batteries from China, which is in
turn reducing the new opportunity in that space
So this move of the company reducing battery share in the total revenue and increasing non battery divisions like electronics (TCAS, TMS),
defence and electric mobility makes sense.
20) For the TCAS, the company received the safety audit report from ItalCertifer (Italy)
With this, the company will have all the approvals necessary to commercialise this product there
Promoter said this certification adds credibility though the market in Italy is very small compared to India and is very confident in
capturing Indian market.
21) The company successfully commissioned the TMS in Howrah Division of Eastern Railway and customised it to meet
the new requirement of Railways for integration with controller office application (COA).
Our view: Retail investors today are redefining
stock market investment better
Lokesh Gorrepati, one of the sharpest ShareBazaar app users, who has vested interest in the stock, turned up at the AGM to ensure that he
gets everything clarified from the horse’s mouth
Coming back to HBL, based on all the feedbacks and scuttlebutt, it seems it can be an interesting story if things go as per plan
Margins can be significantly improved with TCAS, TMS and defence verticals
Electric mobility services could be an icing on the cake over next three years
Ultimately, the stock market is slave of earnings
If the company delivers or even comes near to its guidance, the stock will perform.
