Fundamental Analysis of HBL Power Systems: In today’s world, batteries are becoming increasingly important. The ability to store energy for use at any time has greater potential when needed. The battery market is expected to grow in response to increased consumption. In this article, we will look at HBL Power Systems Ltd., a manufacturer of lead-acid batteries for a variety of industries.

Fundamental Analysis of HBL Power Systems

Company Overview

HBL Power Systems Logo

HBL Power Systems Ltd. has been in business since 1977, when Jagadish Prasad Aluru founded it. It specialises in engineered products and services.  The products chosen and successfully used were aircraft batteries.

The expertise in batteries provided opportunities and ideas for diversification. The company expanded into new battery-based businesses and markets, such as industrial electronics, defense electronics, and railway electronic signalling.

telegram channel

The diversification, leveraging the company’s engineering strengths, has resulted in new businesses in precision manufacturing, spun reinforced concrete, and green technology.

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Segment Analysis

The company recognises its revenue from batteries and electronics. Batteries accounted for 86.43%, electronics for 10.73%, and the remainder was unallocated, accounting for 2.84% in FY23. In fiscal year 23, domestic sales accounted for 84.84% of revenue, with exports accounting for the remaining 15.15%.

The batteries and electronics segments increased by 8.20% and 33.04%, respectively, year on year. The company has six manufacturing facilities across Andhra Pradesh and Telangana.

Industry Overview

Batteries are evolving as technology advances. The battery market is dominated by lithium-ion batteries, and technology is improving for energy storage through the use of salt.

The Indian lead acid battery market is expected to grow at a CAGR of more than 9% between 2023 and 2028. 

During the forecast period, business volumes are expected to be driven by rising demand from telecommunications and data centres, as well as increased applications in industries such as railways, defense, etc. 

The replacement battery segment currently holds a market share of more than 70%. Growing technological advancements, combined with the strengthening of the telecommunications sector, are boosting India’s lead acid battery industry.

Fundamental Analysis of HBL Power Systems – Financials

Revenue and Net Profit

The company’s revenue stood at Rs. 1,368.67 crore in FY23 as compared to Rs. 1,236.21 crore in FY22, an increase of 10.71%. Net profit stood at Rs. 98.65 crore in FY23 as compared to Rs. 93.71 crore in FY22, an increase of 5.27%.

Revenues have been stagnant over the last five years, with a CAGR growth of 2.06%. Net profits grew at an impressive 37.13% CAGR, and the company’s profits increased exponentially after FY21. 

Particulars/ Financial YearRevenue (Cr.)Net Profit (Cr.)
2022-23₹ 1,368.67₹ 98.65
2021-22₹ 1,236.21₹ 93.71
2020-21₹ 912.03₹ 13.72
2019-20₹ 1,091.78₹ 26.21
2018-19₹ 1,261.73₹ 27.73
CAGR (4 Years)2.06%37.13%

Profit Margins

The company’s OPM was consistent at 11% in FY22 and FY23. NPM was 7.09 in FY23 as compared to 7.50% in FY22. The average for OPM and NPM was 8.80% and 4.07%, respectively. The company’s margins increased significantly from FY22. Manufacturing costs were also kept under control, which helped margins improve, according to the financials.

Particulars/ Financial YearOPM (%)NPM (%)
2022-2311%7.09%
2021-2211%7.50%
2020-217%1.35%
2019-207%2.30%
2018-198%2.13%
Average (5 Years)8.80%4.07%

Return Ratios

RoE and RoCE were 10.36% and 13.25% in FY23, compared to 10.84% and 12.90% in FY22. The average was 5.99% and 9.25% over five years.

The company’s return ratios have improved from FY21. RoCE is higher than RoE, indicating better debt utilisation. HBL has been performing better and growing over 5-year average.

Particulars/ Financial YearRoE (%)RoCE (%)
2022-2310.36%13.25%
2021-2210.84%12.90%
2020-211.75%4.67%
2019-203.39%7.08%
2018-193.61%8.37%
Average (5 Years)5.99%9.25%

Debt Analysis

The company had Debt to equity ratio of 0.08 in FY23 as compared to 0.06 in FY22. Interest coverage ratio was 25.83 times in FY23 as compared to 20.51 times in FY22.

Over five years, the average D/E and interest coverage ratios were 0.13 and 10.72%, respectively. The debt is under control and the coverage ratio is improving as profits are increasing.

Particulars/ Financial YearD/EInterest Coverage
2022-230.0825.83
2021-220.0620.51
2020-210.072.6
2019-200.182.54
2018-190.282.15
Average (5 Years)0.1310.72%

Key Metrics

Here are some of the key metrics of HBL Power Systems Ltd.

ParticularsAmountParticularsAmount
CMP₹ 461.65Market Cap (Cr.)₹ 12,796
Stock P/E (TTM)71.46EPS (TTM)₹ 6.46
RoE (%)10.36%RoCE (%)13.25%
Promoter Holdings (%)59.11%Public Holdings (%)38.58%
Debt to Equity Ratio0.08Interest Coverage Ratio25.83
Enterprise Value (Cr.)₹ 2,571.14Net Profit Margin (%)7.09%

Fundamental Analysis of HBL Power Systems Ltd – Future Plans

  • The government is investing in capex for railways, KAVACH, an anti-collision feature for trains, is gaining traction for installation to avoid accidents, and the company has more expertise in the segment, which can help increase revenue.
  • The company intends to invest Rs. 90 crore in capex in FY24, excluding their investment in Tonbo Imaging Ltd worth Rs. 150 crore.
  • The company has projected its sales for FY24 – 1,750 crore, FY25 – 2,300 crore and FY26 – 2,900 crore. Revenue growth is expected to occur across various segments, including Industrial Batteries, Defence and Aviation Batteries, and Industrial Electronics.

Conclusion

As we near the end of the article, let us briefly review Fundamental Analysis of HBL Power Systems. HBL’s profitability has improved due to increased margins. Further revenue growth and margin control will benefit both the company’s market share and its shareholders.

Its low or zero debt-to-equity ratio can help it scale its business more effectively. The government’s investment in capex for railways, particularly the installation of KAVACH systems, has the potential to significantly increase their expertise and opportunities.

What do you think about the company’s prospects? Let us know your views in the comments section below.

Written by Santhosh

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