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HFCL
Our verdict on HFCL isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
Management significantly outperformed its sequential growth guidance for the final quarter of FY26. (4 exceeded, 1 missed across 5 tracked commitments)
“And going forward, I think our revenue in this current quarter would also show some growth. Percentage, I cannot say very clearly at this point of time. But yes, it can be somewhere around 10% to 15% or a little bit more.”
The cumulative EBITDA margin for 9MFY26 stands at 15.67%, which is significantly below the guided range of 18% to 20%, despite a strong Q3 performance of 20.11%. (3 missed across 3 tracked commitments)
“Generally, you can say net margins are centered around 10% or so generally. And EBITDA margin would remain about in any way 18% to 20% kind of a number. But I think we should be able to maintain the same number what we are seeing right now.”
Data centre interconnect solutions are projected to contribute significant additional revenue over the next two years. — target: Rs.400 crore in FY27 and Rs.800 crore in FY28
“It is expected that data centre interconnect solutions will contribute about Rs.400 crore additional revenue in FY26-27 and about Rs.800 crore in FY27-28.”
Expectation of meaningful order inflows from BharatNet circles. — target: Meaningful order inflows (+1 more commitment)
“We have participated in two additional circles this quarter. We expect meaningful order inflows from these circles, further strengthening our leadership position as a key partner in building the nation’s broadband infrastructure.”
The company expects to mitigate NFS receivables of approximately INR 400 crores by the middle of the next financial year. — target: INR 400 crores
“go down because particularly NFS, the receivables, which are still to the tune of INR400 crores is expected to be totally mitigated by the mid of next financial year.”
See the full cited Management analysis of HFCL
How durable is the business?
HFCL is significantly expanding its manufacturing capacity for high-count fiber cables (IBR) from 1.73 million fkm to 19.01 million fkm per annum to meet surging global demand from data centers. (5 expanding)
“approved the expansion of IBR cable capacity from ~1.73 million fiber kilometers per annum to ~19.01 mn fkm /per annum at our Hyderabad and Goa facilities.”
The company is successfully shifting its revenue mix toward products, which now account for 66% of total revenue in Q1FY26, up from 61% in FY25. (5 expanding across 2 engines)
“Products vs Projects... 62% Products... Shift from project-led to product-led revenue”
See the full cited Business Model analysis of HFCL
Where does growth come from?
The expansion plan for high-capacity IBR cables has been significantly upsized and accelerated, with the board approving a massive jump in IBR capacity to meet global demand. (2 accelerating, 3 steady across 5 signals, 2 leading indicators)
“OPTICAL FIBER CABLE CAPACITY EXPANDING TO 42.3 MN FKM/ANNUM (IN MN FKM/ANNUM)”
The order book shows significant acceleration, growing from ₹6,776 crore in Q1FY25 to ₹10,480 crore in Q1FY26, a 54.6% increase year-over-year. (5 accelerating across 5 signals, 1 leading indicator)
“Order Book Expanded 3x ₹7,010 Cr (FY23) → ₹21,206 Cr in FY26”
The company is establishing a new revenue stream from Passive Connectivity Solutions (PCS) for data centers, with significant revenue expected to start in the next financial year. (2 new trend, 2 accelerating across 4 signals)
“Data centre interconnect solutions are expected to contribute significantly to our performance going forward. It is expected that data centre interconnect solutions will contribute about Rs.400 crore additional revenue in FY26-27”
Management expects a significant jump in overall profitability (EBITDA margins) as they integrate their supply chain and sell more high-tech products. — EBITDA Margin: +330-430 bps (+1 more signal)
“EBITDA margin to expand from ~16.7% in FY26 to 20-21% by FY29”
HFCL is aggressively pivoting toward private sector clients to improve margins, with private revenue share reaching a multi-year high of 81% in H1FY26. (1 accelerating across 1 signal)
“Revenue share from Private Customers: Private FY24 74% FY25 65% H1FY26 81%”
See the full cited Future Growth analysis of HFCL
What could break the thesis?
INTENSIFYING. Current borrowings have increased significantly to ₹951.16 Cr in FY25 from ₹808.05 Cr in FY24, and total current liabilities have jumped to ₹2,887.87 Cr. (5 intensifying, 3 high-severity)
“CURRENT LIABILITIES (i) Borrowings: FY26 1323.49, FY25 951.16”
Trade receivables have increased from ₹1,891.73 Cr to ₹2,212.18 Cr year-over-year, showing that the collection risk is worsening. (1 intensifying, 4 stable, 1 high-severity)
“Lastly, sir, the receivable number on our balance sheet like almost more than INR2,000 crores of receivables. So could you give a split how much of these receivables is from the EPC segment?”
The company is heavily investing in a massive expansion of its manufacturing capacity for optical fiber and cables, which carries the risk of under-utilization if demand does not meet expectations. [EXECUTION]
“OPTICAL FIBER CAPACITY EXPANDING TO 33.9 MN FKM/ANNUM... OPTICAL FIBER CABLE CAPACITY EXPANDING TO 42.3 MN FKM/ANNUM”
EASING. Management expects EPC losses to mitigate as revenue from the BharatNet Phase III project begins to accrue, which will improve overhead absorption and margins. (2 easing, 2 intensifying)
“Yes, yes, yes. It will happen because with the increase in revenue, particularly in increasing the use of BharatNet, this is definitely going to happen [mitigating losses].”
EASING. Revenue share from private customers has increased dramatically to 91% in Q1FY26 from 65% in FY25, reducing reliance on government tenders. (2 easing)
“Revenue share from Private Customers... 91% (Q1FY26)”
See the full cited Risk analysis of HFCL
Read the full thesis on HFCL
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