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HBL Power Systems Limited is a public limited company incorporated and domiciled in India and has its registered office at Hyderabad, Telangana State, India. The principal activities of the company comprise of manufacturing of different types of Batteries including Lead Acid, NiCad, Silver Zinc, Lithium and Railway and Defence Electronics, Solar Photovoltaic Modules and other products. The Company is also engaged in service activities related to the above products.

Investment Rationale

* New Capex For Lithium Ion Cells and Electric Drive Trains (EDT) : HBL Power to set up its own manufacturing facility at Hyderabad to manufacture Lithium Ion cells and Electric Drive Train (EDT). The proposed capex is expected to be around Rs 110 Cr and to be completed in two phases. The Proposed capex to be funded through term debt of Rs.80 crore and balance through internal accruals. The Phase I of the project is envisaged to achieve COD by Q3FY23 and Phase II work will start after successful completion of Phase I. Revenue to boost by 10% post completion of the capex, and company to receive order related to EDT.

* Deployment of Indigenously Developed TCAS system by I.R.: India used to import Train Collison Avoidance System (TCAS) for Indian Railways (I.R) which now indigenously developed by HBL power in alliance with Siemens. HBL Power has received order worth Rs 672 Cr related to deploying TCAS in “Vande Bharat Express”, GOI has mandated to deploy system in planned manner in order to raise advance safety functions. HBL power to benefit sustainably from this opportunity.

* Stable Financial Profile along with proven Track Record: Company has maintained strong capital structure with a net worth of Rs 866 Cr and asset turn of 1.13(x). company has a ROE/ROCE of 10.4%/13.4%. company is led by Dr. A.J. Prasad- chairman & MD who has three decades of experience in electronics sector. Companies battery vertical also works in association with defence.

* Outlook and Valuations: We estimate a 15% CAGR in Topline over FY22-25E, which implies a forward PE (x) of 22.5 for FY 25E. We value it with a earnings multiple of 26.5x to FY25 earnings estimate which results per share value of Rs 137. We recommend BUY on HBLPOWER at CMP of Rs. 116 with Target price of Rs. 137 (18%).

Hbl Power Systems Ltd

Observation

* While looking at the border picture of HBLPOWER, we can spot that the prices are in a clear uptrend while forming Higher High, Higher Low formation and following the Bullish trendline.

* The stock have started to show bounce to the upside post the breakout of the Rectangle pattern, which had occurred in first week of October 2022. ? The breakout is confirmed as it is accompanied by Higher volumes. The uptrend since April 2022 was supported by high volume activity which illustrates the Long Built up behind the stock.

* Prices on every dip have taken support from the Bullish trend line or the variable support of 21 weeks EMA.

* RSI on the weekly time is rising and have sustained well above 50 mark on daily as wells as on weekly timeframe reflecting strong momentum behind the prices

Buy Hbl Power Systems Ltd at CMP: Rs 116 | Target: Rs 137 (18%)| SL: Rs 99

Inference & Expectations

* The stock is in clear uptrend with high volumes and strong momentum.

* Going ahead we expect the prices to go higher till the 155 level

* The stoploss must be 99 on the closing basis.

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