Long-term investment plans - HPL Electric & Power Limited
HPL Electric & Power Ltd - Why I am recommending this stock for your long-term investment plans ?
The primary purpose of writing this blog post is to make you understand the importance of long-term investment. I have already written may articles on different stocks for your long-term portfolio creation. In this article also I am introducing you a stock for your long-term investment plans. Before that I am glad that certain stocks that I have recommended was performing very well now and almost doubled my investment in one year. The stocks are NCC Ltd and REC Ltd. Read the article and learn about those stocks and add in your portfolio now. In the end of this article I will provide you each and every stocks that I have recommended till now.
Now read about why your long-term portfolio needs additional requirement ?
Company Review
- HPL Electric and Power Ltd is a multi-product electric equipment manufacturer with a wide range of products divided into Metering solutions, Switch gears, LED Lighting, Wires & Cables, Solar solutions, and Molecular switches. The company is successfully creating a name in the electrical equipment manufacturing industry.
- The company has also been expanding its global presence with exports to over 50 countries.
- HPL Electric and Power Ltd have claimed their order book of 748 crores as on June 2022.
- The company is also engaged in solar products.
Sector
India's power sector has done tremendous progress over the last decade with a CAGR of 8.1 %. India is the 3rd largest producer of electricity with an installed generation capacity of 3,999,496 MW as of 31st March 2022. Sector diversification is an important procedure for the nourishment of your long-term investment plans.
Financial Statements
Key takeaways from the financial statement
Balance sheet
- The capital work in progress has increased in the financial year 2021-22. This implies the company is expanding its manufacturing capacity.
- The value of intangible assets decreased
- The investment made by the company is static for the last 2 consecutive years. This implies the company's investment activities are in a positive phase.
- Non-Current liabilities decreased. This implies the company can easily clear its short-term debts.
Profit & Loss Statement
- The total revenue of the company is generated from sales of products. This is not entirely a negative sign. But the diversification of income is not present here.
- Profit after tax is only 7 crores which is less than 10 crores from the previous financial year. But in Chairman's message, he is referring to this portion that the PAT is reduced as the tax regulations were changed by the government during the FY.
Cash flow Statement
- Net cash flow from the operating activities increased during FY22.
- There is a notable decrease in inventories. This implies that sales are taking place faster than production.
- The company is more engaged in investment activities than the previous financial year.
Financial Ratios
- Earnings per Share (EPS) - 1.01
- Price to Earnings ratio (P/E) - 90, The optimal P/E value is below 15 and the P/E value of HPL Electric and Power Ltd exceeds 15 and this is a negative sign. But when we check the other peers in the industry the value seems reasonable.
- Price to Book ratio - 0.77, which is good and is under 1 which the optimal value
- Return on Equity - 1, the better value for ROE is above 15%
- The current ratio - is 1.4, which is very good as the company can clear its current liabilities using the current assets.
The values of financial ratios are not healthy for HPL Electric & Power Ltd. Even though, I am suggesting this stock because the other fundamentals are strong and the company seems to deliver a better performance in the future. The financial ratios are not only factors for long-term investment plans. Please keep that in mind before making a decision for investment.
Company Management
- Mr. Lalith Seth is the Chairman and the Managing director of HPL Electric and Power Ltd. He founded HPL in the year 1992. Under his leadership, HPL Electric and Power become the leading player in the Indian electric industry.
- In Chairman's message, he is announcing the milestone they achieved during the FY that their margin of profit has crossed 1000 crores this year.
- The major promoters of the company are Mr. Rishi Seth (Managing Director), Mr. Lalith Seth, Mr. Bindhu Seth ( Whole time director), and Mrs. Shiktha Seth (whole-time director).
- The company management is here done by the family members.
Share Holding Pattern
- Promoters - 72.7 %
- Individuals upto 1 lakh - 19.6 %
- Individuals exceed 1 Lakh - 4.1 %
Revenue generation
The major portion of the revenue comes from Metering products. Metering products include single-phase and three-phase energy meters for residential, commercial, and industrial uses. They are used to record and measure the usage of electricity. The company's metering solutions are used by utilities, government agencies, and private agencies across India and around the world.
Conclusion
From the annual report of FY22, HPL Electric and Power Ltd is showing a good performance and profitable business. The Market capital of the company is 590.27 crores and it is a low-cap company. Although the financial ratios show some irregularities the profitability of the firm is static. Also, some of their products are related to the EV sector. In the future, when EV usage increases the potential benefit will receive under profitable collaborations.
Useful analysis
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