HPL Electric & Power Private Limited (HPL) is a New Delhi based company
engaged in manufacturing of energy meters, switchgears, lighting equipments
and wires and cables. Company operates seven manufacturing facilities located
in Haryana and Himachal Pradesh. HPL has pan-India presence and its
distribution network includes 2,400 authorized dealers/distributors, selling
products to 15,000 retailers. As per its FY16 numbers, Metering contributes 47%
of the total revenues whereas switchgears (15%), Lighting equipment (24%) and
Wires and cables (14%) form the rest of the business mix. B2C sales represent
44% of the total sales and B2B sales represent remaining 56% sales. On the valuation front, at the upper end of the price band,
the pre-issue P/E works out to 25.6x of its FY2016 earnings which is lower
compared to its peers. However this discount is justified considering its
significantly low ROE, stretched working capital and low profitability compared to
its peers. Considering past financial performance and poor visibility on future
growth, we rate this issue as NEUTRAL.
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