Recommendation From Other Elect.Equip./ Prod Sector

This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

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HERE IS WHY 

Renewed focus on telecom batteries
Restructuring and operational efficiencies
Expected growth in railway electronics and defence 

HBL Power Systems Limited is engaged majorly in the business of producing batteries. The company has strategically organised its business into segments, including batteries, electronics and defence. The company provides various products for defence, aviation, telecom and industrial application businesses. Its products include batteries, including lead acid batteries, nickel-cadmium batteries and specialised defence batteries; power electronics, which includes thyristor battery charger, switch mode rectifiers, battery monitoring system and earth leakage monitor; concrete products, renewable energy, engineering solutions, which includes training simulators and railways. 

HBL Power Systems' batteries segment accounted for about 80 per cent of its overall revenue in FY17, making it the second largest supplier of batteries to the Indian telecom sector and the largest defence and aircraft battery manufacturer in India. The company is also a significant supplier to the Indian Air Force and is an approved source for UAV OEMs. 

On the financial front, HBL Power System posted a 17.30 per cent rise in its revenue to Rs.442.07 crore in the second quarter of FY18 on a yearly basis. The company's PBIDT grew by 7.35 per cent to Rs.38.02 crore in Q2FY18, as against Rs.35.42 crore in the same quarter of the previous fiscal. The company's profit after tax increased by 13.60 per cent to Rs.10.93 crore in Q2FY18 on a year-onyear basis. 

On an annual basis, the company's net sales grew by 9.61 per cent to Rs.1,529.86 crore in FY17, as against Rs.1,395.71 crore in the previous fiscal. However, the company's PBIDT fell by 3.83 per cent to Rs.130.05 crore in FY17 on a year-on-year basis. The company's profit after tax grew manifold by 407.15 per cent to Rs.34.74 crore in the financial year 2017 as against Rs.6.85 crore in the previous fiscal. 

The company is looking at a bright future as the aircraft battery market is estimated to increase from USD 160 million in 2016 to USD 200 million in 2022. Also, the market for Ni-Cd sintered plate batteries for civil and military aircrafts is expected to be around USD 100 million in 2018. There are few manufacturers of Ni-Cd aircraft batteries and the growth of new entrants into this market is expected to be slow. 

The government initiatives to promote renewable energy capacity, such as the 10-year tax exemption for solar energy projects, the National Electric Mobility Mission Plan 2020 envisaging large scale deployment of electric 2-wheelers, 3-wheelers, cars and buses and the ambitious plan of having an all-electric car fleet by 2030, is setting the tone for a strong profitable future for the company in the long run. Hence, we recommend investors to BUY the stock.