ICICI Direct has recommended multibagger HPL Electric for 36% upside potential

HPL Electric & Power is already a multibagger with a YoY return of 36%. ICICI Direct has foreseen further 36% upside potential in the stock and recommended a buy.

HPL Electric & Power (HPL), incorporated in 1992, is among India’s leading electric equipment manufacturer with a formidable presence across two major segments, 1) Metering & Systems and 2) Consumer & Industrials

• Metering & systems segment contributed ~58% to total revenues as of FY24, while balance ~42% by consumer & industrials. Company has 7 manufacturing facilities (5 in Haryana & 2 in Himachal) and 2 R&D centers. In meters segment, company has an annual capacity of 11 million units.

• Strong order backlog in smart meters segment with robust pipeline; execution remains healthy: We believe that smart meters segment will remain the key growth driver for HPL in the coming period. Company’s execution remains healthy in smart metering segment, which grew by 32% YoY in H1FY25. We believe that execution is expected to pick-up further in the coming periods led by increasing localisation with in-house manufacturing of required critical components. Company’s order book stands strong at Rs 3500+ crore as of Sept 2024 (~94% of OB is for smart meters and would be executed in 2-2.5 years). The order backlog implies 3.6x of TTM metering revenues, providing strong medium-term growth visibility in the segment. Moreover, the company is strongly positioned to get significant number of orders in coming future also as the tendering activities remains healthy. Out of 22.24 crore meters sanctioned by the govt, large part is yet to be awarded to meter manufacturers like HPL

Rating and Target Price

• HPL is strongly positioned to witness healthy growth led by robust opportunity arising in smart meters segment. Moreover, consumer & industrial segment too is poised to grow considerably in the coming period. We estimate revenue CAGR of ~22% over FY24-27E while EBITDA & PAT to grow at ~28% & ~48% CAGR respectively over the same period

• We recommend BUY on HPL Electric with a target price of ₹ 660 per share (based on 30x P/E to FY27E EPS)