Why HPL Electric Share Price is Rising

The electronics sector in India has been a shining star, witnessing phenomenal growth in recent years.

Fuelled by rising consumer demand and government initiatives, this industry has become a hotbed of opportunity.

One of the major beneficiaries of this boom has been HPL Electric and Power. The company has delivered stellar returns to investors, surging a staggering 232.5% in the past year.

This upward trajectory continued with a 105.4% rise in 2024.

The company has once again captured investor attention with a remarkable 20% rally in its share price.

Let's explore the reasons behind this latest surge and delve deeper into the company's future.

#1 Big Order Win

HPL Electric and Power share price rallied 20% today as it announced that it has secured a significant order worth Rs 21 billion (bn) to supply smart meters to its regular major clients.

This win is part of standard business operations and will be executed based on the agreements in place.

The size of this order is impressive for several reasons. This order surpasses the total value of HPL Electric's order book at the close of the previous financial year.

As per its latest annual report, HPL Electric ended last year with an order book exceeding Rs 15 bn. The majority of this (around 82%) came from their metering and systems segment, with a focus on smart meters (75%).

This focus on smart meters is a positive development for the company as it offers higher profits compared to regular meters.

Also, the order value represents nearly two-thirds, or 64%, of HPL's current market capitalisation of around Rs 33 bn. This signifies a substantial win for the company.

#2 New Memorandum of Understanding

Two days ago, HPL Electric's share price surged 13% as it announced that the company signed a new memorandum of understanding (MoU).

On 8 July 2024 the company announced that it has entered into a strategic partnership with Guangxi Ramway Technology, a major player in China.

The agreement focuses on establishing local manufacturing capabilities in India for key products like relays and latching relays. This move is likely to be implemented in phases, with a technical tie-up to support assembly within the country.

The prospect of domestic production, potentially reducing reliance on imports and offering cost advantages, is a major reason behind the positive investor reaction to the news.

This partnership could also lead to knowledge transfer and technological advancements for the company, further strengthening its position in the market.

What Next?

HPL Electric's smart metering segment has shown significant results, with a 27% year-on-year (YoY) growth.

The company plans to enhance its smart metering solutions through its partnership with Wirepas, aligning with India's energy sector changes.

HPL Electric's presence in over 42 countries signifies a strong global footprint. The company aims to increase exports across all product segments, supported by a robust pipeline of international orders. This will be crucial for sustaining revenue growth and diversifying market risks.

The company plans to increase its smart meter production capacity to 150 million (m) over the next few years. This expansion will be gradual and demand-driven.

Additionally, it will focus on operational excellence and cost efficiency to maintain and improve its EBITDA margins.

In the consumer products segment, it plans to expand its distribution channels and enhance brand recognition. Channel expansion and strong relationships with partners will drive sales growth.

The company has set ambitious targets for the coming financial year, expecting revenues of Rs 18 bn or more. It also aims to optimise its product mix and cost structure to enhance profitability.

The company will continue to invest in research and development to stay ahead in the market. This includes developing new products and solutions that meet evolving customer needs and regulatory standards.

How HPL Electric Share Price has Performed Recently

In the past five days, HPL Electric share price has rallied more than 25%. In 2024 so far, it is up 105.4%.

The stock surged 92.2% in the past six months and it rallied around 232.9% in the year gone by.

The stock touched its 52-week high of Rs 562.9 on 11 July 2024 and a 52-week low of Rs 168.1 on 12 July 2023.

About HPL Electric & Power

HPL Electric & Power is a major manufacturer of electrical equipment in India, operating in five main areas: metering solutions, switchgears, LED lighting, wires and cables, solar solutions, and modular switches.

Its facilities product design and development, component designing, tool manufacturing, and commercial production.

With over four decades in the Indian electrical industry, HPL's products comply with Indian and international standards such as ISI, CE, and KEMA.

For more details, see the HPL Electric fact sheet and quarterly results.

For a sector overview, read our engineering sector report.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...