INVESTMENT IDEA

HBL Power Systems Oct 30, 2017

Industry CMP Recommendation Add on dips to Targets Time Horizon

Elect Equipment Rs. 56 Buy at CMP and add on Dips Rs. 49-56 Rs. 67-82 4 -6 Quarters

Company Background

HBL Power Systems is engaged in the business of manufacturing batteries and electronics power systems and
products. The Company's segments include Batteries and Electronics - consists of various types of products for
HDFC Scrip Code HBLPOW defence, aviation, telecom and industrial applications. Its products include batteries, including Lead Acid
Batteries, Nickel-Cadmium (Ni-Cd) Batteries and Specialized Defence Batteries; Power Electronics; Renewable
BSE Code 517271
energy and HBL Green Products Division and Engineering Solutions. Company had closed FY17 with ~Rs 1500cr
HBLPOWER
NSE Code revenues with ~80% revenues battery segment. HBL derived ~89% revenues from domestic market while the
balance from exports for FY17.
Bloomberg HBPS
CMP as on 27 Oct’17 56 Investment Rationale
Equity Capital (Rs cr) 27.7
HBL Power Systems is in business since 1977, with a focus on engineered products and services. The Company’s
Face Value (Rs) 1 business selection strategy has been pivoted on the ability to identify technology gaps in India which could be
Equity O/S (cr) 27.7 filled in by it through ‘indigenous efforts’ – truly living up to the Make in India drive, since four decades.
Market Cap (Rs Cr) 1418
The first products selected and successfully developed were Aircraft batteries - eventually leading to HBL offering
Book Value (Rs) 26
the world’s widest range of specialised batteries. The Company leveraged the expertise gained in the battery
Avg. 52 Week Vol 782313 business to capitalise on new opportunities. Company has moved into new businesses and markets that use its
52 Week High (Rs) 71 batteries, such as industrial electronics, defence electronics, and railway electronics.
52 Week Low (Rs) 30
HBL has re-organised its business into strategic business units Batteries, Electronics and Defence. Battery
revenues accounted for ~83% of overall revenues in 2016-17. HBL being one of the largest player in the industrial
Shareholding Pattern (%) batteries segment, economic revival in sectors like railways, capital goods, Telecom etc. would be key positive
Promoters 56.4 growth driver for the company.
Institutions 26.5
Company has guided better growth for its electronics and others segment (Ex. Batteries) which would drive
Non Institutions 17.1 growth momentum for the company. We have estimated 29% revenue cagr for its electronics segment and
healthy growth of 8% for its batteries segment for the next three years.
PCG Risk Rating* Red
* Refer Rating explanation HBL trades at ~15x FY20E PE and ~9x EV/EBITDA. Based upon ~22x FY20E Earnings and ~13x EV/EBITDA we
have arrived to TP of Rs 82. We recommend investors to BUY the stock at CMP of Rs 56 and add on dips to Rs
49 with TP of Rs 67 and Rs 82 over the next 4 quarters.
Kushal Rughani
kushal.rughani@hdfcsec.com

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Key Highlights Key Points

HBL Power Systems is engaged in
the business of manufacturing
batteries and electronics power
systems and products.
HBL has re-organised its business
into strategic business units
Batteries, Electronics and
Defence. Battery revenues
accounted for ~83% of overall
revenues in 2016-17.
 Key Revenue Segments: Batteries (~80%) Electronics (~13%) and Others (~7%)
 India's Second Largest Supplier of Telecom Batteries
 HBL Power is the only Indian Entity to possess Pure Lead Tin (PLT) battery technology
 Major domestic supplier for Defence Batteries
 Company is the supplier of Batteries for Aviation-fighter and civil aircrafts and helicopters
 Pioneered a Train Collision Avoidance System for Indian Railways
 Developed Grid Tie Inverter for Solar Application
1977 FY04 to FY09 FY11 to FY14 FY15 to FY17

Key Revenue Segments:

Batteries (~80%) Electronics
(~13%) and Others (~7%)

HBL is the largest aircraft battery

manufacturer in India and one of
the few in the world. It had
received OEM business from
Bombardier Aerospace for Lear
85 and Global 7000 Business Jet
Aircrafts.

Company has guided better

growth for its electronics and
others segment (Ex. Batteries)
which would drive growth
momentum for the company. We
have estimated 29% revenue
cagr for its electronics segment
and healthy growth of 8% for its
batteries segment for the next
three years.
Source: Company, HDFC Sec Research

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HBL Power Systems Oct 30, 2017

One of the largest player in telecom batteries

HBL manufactures a wide range of specialised batteries for a spectrum of applications using varied technologies – the broadest product
range among the manufacturers in India. The Company has developed all these technologies in-house and is therefore free to export.
The company’s range of products includes Tubular gel and Tubular flooded batteries, PLT batteries and Ni-Cd batteries across different
business verticals namely UPS, Solar, Automotive OEM, Industrial applications Telecom amongst others.

HBL’s battery segment contributes approximately 83% to its revenue which stood at Rs 1270cr for FY17, +23% over FY16. The five
year CAGR for the segment stood at 5.5% for the company.

Its electronics segment posted 12.7% CAGR in last five years to Rs 163cr in FY17. However, in the last financial year growth was
muted to 2.7%. The lower growth in the year was due lower traction from its railways business. The company however is optimistic
going ahead as most products are in advanced stages of approval cycle.

HBL’s battery group is the flagship business of the Company contributing about ~80% to the overall revenues. The batteries are
manufactured at its fully-integrated facilities, using diverse technologies at four locations – two each in the state of Andhra Pradesh
and Telangana. Within the battery space – telecom batteries is the largest contributor for the company. HBL has in short term embarked
upon a consolidation plan which aims to fortify the position in larger telecom segment, enlarge the presence in UPS market - invest in
capacities and reach, aligned to scale and market penetration, increase business alliances with DG manufacturers with both PLT – VRLA
and PLT vented ranges, increase awareness of solar battery range among the integrators.

Also the company plans to aggressively promote PLT batteries, which offer better TCO, for data center applications, market e-rickshaw
tubular batteries through channel and secure product approval from major OEMs and capitalise on export opportunities for advanced
version of 2V-VRLA and PLT batteries.

Over medium to long term, the factors contributing to the growth of company are new approvals from major OEM players, launch of
new advanced batteries like 2V-VRLA, penetration into new markets like aviation and defence amongst others. The company has also
initiated a plan to manufacture prismatic Lithium Ion cells and batteries for specialised applications. The project is likely to be
implemented in the medium term.

Electronics and Defence

HBL’s electronics business initially started off with the singular focus on developing products for Railways. Over the past 15 years the
company has developed many products like TCAS (Train Collision Avoidance System), Electronic Interlocking System, permanent
magnet alternators. The company’s Electronic Interlocking System is undergoing approvals and should be commercialized in the next
12 to 18 months.

The company lately is also developing products into new segments in order to reduce concentration from railways business. Currently
HBL has added two new product segment into its electronics business namely Electric mobility comprising of products like Brush Less
DC Motors for e-rickshaws and Solar inverters for grid connectivity.

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In its defence business HBL offers its products for Army, Navy, Air Force and Civil Aviation requirements. It also has a long association
with India’s defence R&D and production establishments. HBL had been awarded a large contract for supplying Digital Control Harnesses
for 6,800 army combat vehicles in past. Currently the company is working on many opportunities; one such large opportunity is in
ammunition.

Going ahead, the company plans to improve upon the existing business for Missile and Torpedo batteries while making sure its business
in naval electronics is steady. The company has also got approval for its batteries for Kilo class submarines while undergoing testing
for the Scorpene class submarine.

HBL Power’s Offerings

Batteries Electronics

Lead Acid Ni-Cd Railways Defence

Telecom Oil & Gas Rail Signalling Defence Electronics

Railways Power SPV Electronics Batteries
UPS Railways Permanent Magnets Ammunition
Power Aviation
Solar
DG Starting
Source: Company, HDFC Sec Research

Business Segments

Telecom

HBL is the second largest supplier of batteries to the Indian telecom sector. Its 2V-VRLA batteries, designed for harsh cyclic application,
enjoy the preferred battery status among telecom operators, tower companies and switching OEMs.

The company has focused on strengthening the service quotient for minimising the service turnaround time, it achieved 100% pan-
India service turnaround time of 72 hours.

In 2016-17 the Company’s product received approval from a leading telecom tower company operating in India, which would result in
sustaining the growth momentum over the coming years.

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Railways

HBL enjoys a preferred supplier status with the Indian Railways and metro rail operators. Its batteries are used for varied applications
namely air conditioned coaches, train lighting, electric locomotives, diesel locomotive cranking and signalling applications.

The segment revenues increased in FY17 as the Indian Railways’ decision to switch over (completely) to VRLA from LMLA batteries for
train lighting application – relatively uncluttered space could help the company improve its market share.

UPS

HBL has initiated presence in this segment only in 2015-16, even though the progress is good enough in establishing foothold in the
UPS space. During 2016-17, the Company received approvals for its products from leading banks and insurance companies operating
in India. It also entered into contractual arrangements with certain banks. Besides, it partnered with OEMs in the UPS segment that
enjoys national and regional presence. These initiatives hold the promise of robust growth over the coming years.

Solar

HBL has significant presence in the solar battery space for its diverse product range (MNRE approved) and high quality products that
offer reliability. During the year, it made a promising headway towards capitalising on the tubular gel opportunities provided by the
solar business – it initiated supplies to Solar Power generating System integrators. And, while the Company is working towards a
stronger presence in the first-fitment phase, the team remains keen to participate in the replacement opportunity when it emerges.

PLT (Pure-Lead-Tin) batteries

These specialty batteries, specifically designed to deliver high current for a short time-period are perfectly suited for large Data Centre
applications and for DG and engine cranking purposes (large vehicles and battle tanks). The Company has been supplying its PLT
batteries to Cummins for its DG sets under white label program – an association that has grown each year for over a decade.

In 2016-17, business with Cummins increased by 25% over the previous year. Company remains focused on making an entry into
defence space for these batteries for heavy vehicle applications – its products are currently undergoing the approval process. In addition,
the Company is redesigning its product specifically for Data Centre applications – a huge opportunity in the horizon. This should open
up high-value, high growth opportunity space for the Company over the coming years.

Ni-Cd batteries

HBL manufactures Ni-Cd batteries leveraging diverse technologies namely pocket plate, sintered plate and fibre plate - enabling it to
create a complete basket of products serving critical applications in diverse sectors namely oil & gas, power, utilities, aviation, railways
and defence. During the year, revenue from this vertical increased by about 30%. The Company focused on increasing their market
share with OEMs in the process industry. In addition, the Company developed and launched premium (ultra-low maintenance) Ni-Cd
pocket plate (“Vent Pro”) battery which was well received by the customers – which should make a meaningful contribution to revenue
growth from this product vertical going forward.

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Channel (Retail) Business

This retail presence strengthens the Company’s domestic business model. HBL had initiated in 2015-16, this vertical has made
considerable headway in establishing strong presence in the domestic market – revenue from this vertical up 90% over the previous
year albeit on a small base.

This channel markets SPV roof-top kits, solar batteries, small and medium UPS batteries, inverter batteries and is gearing up to market
DG batteries and e-rickshaw batteries as well. The Company upgraded its UPS batteries to suit the enhanced warranty requirement of
the market, and trial tested E-Rickshaw batteries in aftermarket in 2016-17, the feedback on which is being incorporated into the
product through redesign and re-engineering. Besides, the Company widened the channel network by more than 50% to further
entrench its presence into demand pockets spreading pan-India.

The Company’s exports are spearheaded by Nickel Cadmium (Ni-Cd) batteries catering to the Oil & Gas, Power and Utility, Railways
segments – this product accounts for more than 70% of the export sales.

Even as sluggishness prevailed in the global oil & gas sector in 2016-17, the Company was able to garner a robust order book primarily
on account of securing additional product approvals, fortifying stronger ties with UPS OEMs and renewing its focus on the emerging
markets for this product. As a result, export revenue for Ni-Cd batteries improved by 20% over the previous year.

To de-risk its global presence from an overdependence on Ni-Cd batteries, the Company is working on creating market for its other
batteries – namely 2V-VRLA, 12V-VRLA and PLT batteries. As a first step towards this goal, the Company has secured UL approval for
its 2V-VRLA variant even as seismic certification is under process. The Company is in the process of identifying suitable markets and
securing approvals for its 12V lead acid products.

Aircraft batteries: A new opportunity window

HBL is the largest aircraft battery manufacturer in India and one of the few in the world. Its product range comprises batteries in Ni-Cd
Sintered Plate, Sealed Lead Acid and Silver Oxide Zinc technologies that find application in defence and commercial aircrafts.

The Company is a major supplier to Indian Air Force and is an approved source for UAV OEMs. The Company has been supplying sealed
lead acid aircraft batteries for Russian origin military aircrafts and helicopters. The Silver oxide Zinc / Ni-Cd Sintered Plate batteries are
being supplied to several air forces across the world.

FY17 was significant milestone for the aircraft battery vertical as the company received OEM business from Bombardier Aerospace for
Lear 85 and Global 7000 Business Jet Aircrafts. In addition, the Company has recently signed an agreement with an American company
to obtain necessary approvals with the American Airworthiness Authority, which will allow HBL to sell its aircraft batteries to airlines in
the US and across the globe.

The overall aircraft battery market is estimated to increase from US$160 million in 2016 to ~US$230 million in 2021-22. The market
for Ni-Cd Sintered Plate batteries for civil and military aircrafts is estimated ~US$100 million in 2018.

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Ni-Cd batteries are projected to remain the preferred and largest battery technology in the global aerospace and defence industry, while
lithium-ion is likely to be the fastest growing battery technology.

There are very few major manufacturers of Ni-Cd aircraft batteries. However the penetration will be slow, as the customers are very
cautious in inducting new makes.

Focus areas for the next two years :

 Improve market share in telecom space by consolidating business with newly acquired customers

 Improve service TAT from 72 hrs to 48 hrs in telecom sector

 Fortify battery sales in solar segment directly and also through Solar Power

 Launch new PLT batteries for data centers and process industries (high rate discharge applications)

 Pursue approval of batteries for army vehicles operating at high altitude Enhance production capacities

 for UPS batteries to meet increasing demand Focus on replacement potential for Ni-Cd pocket plate batteries catering to the Power and
Oil & Gas segments

 Enhance sales of premium Ni-Cd pocket plate batteries (“Vent Pro”)

 Increase production capacity of Advanced VRLA batteries at VZM factory to meet peak demands

 Widen the channel network and launch upgraded version of e-rickshaw batteries

 Explore emerging opportunities in Energy Storage Solutions and finalise business blueprint

 Enhance share of business with global OEMs for Ni-Cd pocket plate batteries

 To improve visibility of lead acid batteries among major users in target export markets.

 HBL is the largest aircraft battery manufacturer in India and one of the few in the world. The Company received OEM business from
Bombardier Aerospace for Lear 85 and Global 7000 Business Jet Aircrafts.

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HBL Power Systems Oct 30, 2017

Railways SBU

HBL’s signalling products comprehensively meet applicable Research designs and Standards Organization (RDSO) specifications and
CENELEC standards. HBL is recognised as a reputed supplier of signalling equipment and solutions, built over many years of experience.

Some of the key technology offerings include: Train Collision Avoidance System (TCAS) TCAS is an automated system which protects
trains from various types of collisions, monitors and applies speed restrictions as well as provides in-cab signal aspect display.

Train Collision Avoidance System (TCAS)

TCAS is an automated system which protects trains from various types of collisions, monitors and applies speed restrictions as well as
provides in-cab signal aspect display. In the year 2010, HBL initiated TCAS development and The Electronics Group of HBL is organised
into three divisions – Railway Electronics, Industrial Electronics and Defence Electronics. In view of the identified opportunities and the
need to augment specialised capability, defence electronics was moved from the Defence Group to the Electronics
Group. The solar division has been merged into the Industrial Electronics Division.

Train Management System (TMS)

TMS is an integrated real-time traffic management system that offers monitoring and control of train movement. TMS acquires the
signalling information like Signals, Track Circuits and Points etc. from the station interlocking system on a real time basis. TMS also
gets the train/rake identification details from the originating point of the TMS zone / territory. This information is processed and used
to monitor movement of trains and facilitates timely decision making for the operators in regulating train movement, diversion of trains,
induction of trains, withdrawal of trains and planning reversal of trains in the TMS zone/territory. TMS helps to significantly increase the
traffic throughput over existing infrastructure, with considerably less investment.

HBL’s TMS is the only indigenous solution available and has already been commissioned in Kolkata Metro and in a 50-station area of
Eastern Railway in Howrah Division. The Indian Railways has made a budget provision of Rs 136 crore in FY18 to expand TMS coverage
in Eastern and Southern Railway. Estimate of three years market potential from 2018-19, for TCAS, EIS, TMS and DAC from the Indian
Railways is about Rs 3000 crore.

Electronic Interlocking System (EIS)

Located at railway stations, this failsafe, automated system controls the movement of trains through multiple tracks in the station and
prevents unsafe movements. This state of the art product was offered for testing by RDSO. This new system may get approved in FY18.

Integrated Power Supply System (IPS)

IPS is a centralised power management solution that receives AC power from the grid, converts it into AC and DC power of different
voltages to replace multiple systems earlier used to operate the various electronics and signalling equipment at a railway station.
HBL is a Part 1 (preferred) supplier to the Indian Railways for this solution. The Company is witnessing significant revenue growth for
the past three years, targets ~Rs 50 crore revenue in FY18.

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Battery Chargers

HBL has been manufacturing and supplying analog thyristor controlled battery chargers for more than 25 years. In fiscal 2018, this
product line will be expanded to include digitally controlled thyristor chargers with advanced communication and remote monitoring and
control features. With new models of advanced technology being introduced in fiscal 2018 and 2019, company expects strong revenues
growth from the business.

Solar Electronics

HBL developed Grid Tie String Inverter(s) for on-grid solar application. These inverters convert the DC power into AC power to be fed
into the grid for downstream usage. Connected in parallel, inverter(s) can be used for up to 200 KW SPV power plants. Field trials and
seed marketing will be the focus in FY18.

HBL has also developed solar pump controllers that convert the DC power into AC power, which can be used to run water pumps. These
are available in 3, 5 and 7.5 HP ratings with various pump heads. Revenue in fiscal 2018 from the above products is targeted at Rs 30
crore.

Defence SBU

Batteries for various applications

HBL is the largest battery manufacturer in India for defence sector. The Company’s in-house developed product basket comprises
batteries for diverse applications – fighter aircrafts, helicopters, transport aircrafts, UAVs, submarine propulsion, light weight and heavy
weight torpedoes, battle tanks, missiles and artillery fuzes, among others.

The Company has developed and secured approval for high performance batteries meant for Kilo class submarine (in 2015-16) and
Scorpene class submarine (in 2016-17) applications. The Company also participated in an Indian Navy tender for supplying batteries
for Scorpene class submarines. These high margin products are expected to result in profitable business growth as they are critical
defence components.

HBL is self-sufficient in the design and manufacture of all types of electronic artillery fuzes for different calibers of artillery guns; also
exploring opportunities in ammunition space.

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HBL Power Systems Oct 30, 2017

Q2 FY18 and H1 FY18 Results

HBL Power has posted ~17% yoy revenue growth for the September quarter while PAT came in ~+15% to Rs 11cr. For H1 FY18, revenues
have increased 12% and net profit up 20% yoy to Rs 19cr. For H1 18, Batteries revenue stood at Rs 649cr, +18% yoy while electronics
segment has posted revenues of Rs 86cr. It has reduced gross debt to Rs 380cr vs. Rs 455cr in Mar 2017.

Valuations & Recommendation

HBL Power posted 9.3% revenue growth for FY17 and stood at Rs 1537cr while EBITDA margin dipped 110bps yoy on the back of higher
RM prices and other expenses. Company has guided better growth for its electronics and others segment (Ex. Batteries) which would
drive growth momentum for the company. We have estimated 29% revenue cagr for its electronics segment and healthy growth of 8%
for its batteries segment for the next three years. We expect 11.8% revenue cagr coupled with 200 bps margin expansion over the next
three years. RM prices and cost control measures would lead to EBITDA margin expansion. We estimate 35% PAT cagr over FY17-20E led
by strong revenue growth, robust operating margin and lower finance costs. HBL trades at ~15x FY20E PE and ~9x EV/EBITDA. Based
upon ~22x FY20E Earnings and ~13x EV/EBITDA we have arrived to TP of Rs 82. We recommend investors to BUY the stock at CMP of
Rs 56 and add on dips to Rs 49 with TP of Rs 67 and Rs 82 over the next 4-6 quarters.

Risks

1. The company’s business is exposed key raw materials such as Lead and Tin, any big surge in those prices may hurt its margins.

2. Any substantial delay in its orders from railways and defence may impact projections negatively.

3. Delay in capex cycles for the industrial segment may lead to weak performance.

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HBL Power Systems Oct 30, 2017

EBITDA trend over FY17-20E

Revenues to see strong ~12% cagr over FY17-20E
2500 16
250 45.2 50
12.7 14
13.4 40
2000
12 200
30
1500 10
9.3 150 22.5 23.8
9.2 20
8
14.2
1000 100 10
6
3.3 4.1 -3.3 0
4 -4.0
500 50
2 -10
1350 1406 1537 1679 1892 2147 139 134 129 147 180 223
0 0 0 -20
FY15 FY16 FY17 FY18E FY19E FY20E FY15 FY16 FY17 FY18E FY19E FY20E

Total Income Growth % EBITDA EBITDA Growth

Source: Company, HDFC sec Research

Source: Company, HDFC sec Research
Return Ratios (%)
EBITDA Margin (%)
25.0
19.8
10.3 10.4 20.0
9.6 9.5 16.8
8.4 8.8 14.2
15.0 13.6 13.2 12.7
7.3 12.1
9.2
10.0
6.0 6.7
4.6
5.0 2.4

0.0
FY15 FY16 FY17 FY18E FY19E FY20E

FY14 FY15 FY16 FY17 FY18E FY19E FY20E RoE RoCE

Source: Company, HDFC sec Research Source: Company, HDFC sec Research

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Electronics Segment Revenues

FY20E Revenue Mix (%)
400

8.0 350

300
16.6
250

200

150

75.5 100

50

0
FY15 FY16 FY17 FY18E FY19E FY20E
Battery Electronics Others

Source: Company, HDFC sec Research

EV/EBITDA Trend
18.0 Net Debt and Net Debt to EBITDA
15.9 700 4.3 5
16.0 14.8 15.3
14.0 600
14.0 3.9
4
11.4 500
12.0 3.4 3.4
2.5 3
9.2 400 1.8
10.0
300 2
8.0
200 1.4
6.0 1
100
4.0 610 579 489 433 393 351 351
0 0
2.0
FY14 FY15 FY16 FY17 FY18E FY19E FY20E
0.0
Net Debt Net Debt to EBITDA
FY15 FY16 FY17 FY18E FY19E FY20E

Source: Company, HDFC sec Research Source: Company, HDFC sec Research

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Income Statement (Consolidated) Balance Sheet

(Rs Cr) FY16 FY17 FY18E FY19E FY20E As at March FY16 FY17 FY18E FY19E FY20E
Net Revenue 1406 1537 1679 1892 2147 SOURCE OF FUNDS
Other Income 13.3 17.6 16.8 18.1 21.1 Share Capital 25.3 27.7 27.7 27.7 27.7
Total Income 1419 1555 1696 1911 2168 Reserves 584 701 738 788 866
Growth (%) 4.1 9.3 9.2 12.7 13.4 Shareholders' Funds 609 729 766 816 894
Operating Expenses 1271 1410 1531 1712 1923 Long Term Debt 107 28 25 23 32
Net Deferred Taxes 15 12 12 12 12
EBITDA 148 145 164 199 244
Long Term Provisions & Others 4 4 10 19 19
Growth (%) -3.3 -4.0 14.2 22.5 23.8
Minority Interest 0 0 0 0 0
EBITDA Margin (%) 9.6 8.4 8.8 9.5 10.4
Total Source of Funds 735 773 812 869 955
Depreciation 50.7 48.5 48.6 52.2 55.4
APPLICATION OF FUNDS
EBIT 97 97 116 146 189
Net Block 464 436 407 390 405
Interest expenses 68 46 42 39 35 Deferred Tax Assets (net) 0 4 4 4 4
PBT 26 54 73 106 152 Long Term Loans & Advances 57 54 43 40 42
Tax 12 14 22 32 46 Total Non Current Assets 522 494 455 435 451
RPAT 14 40 50 73 104 Current Investments 0 0 0 0 0
Growth (%) -45.3 171.7 26.9 45.5 43.9 Inventories 396 408 428 467 529
EPS 0.6 1.4 1.8 2.6 3.7 Trade Receivables 427 471 492 529 576
Source: Company, HDFC sec Research Short term Loans & Advances 3 3 4 5 7
Cash & Equivalents 34 26 54 51 48
Other Current Assets 53 63 74 84 88
Total Current Assets 913 970 1051 1135 1249
Short-Term Borrowings 415 430 391 347 333
Trade Payables 165 164 185 212 244
Other Current Liab & Provisions 105 81 98 117 139
Short-Term Provisions 17 17 21 24 29
Total Current Liabilities 702 693 695 701 745
Net Current Assets 211 278 357 434 503
Total Application of Funds 736 773 812 869 955
Source: Company, HDFC sec Research

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Key Ratios
Cash Flow Statement
(Rs Cr) FY16 FY17 FY18E FY19E FY20E
(Rs Cr) FY16 FY17 FY18E FY19E FY20E
EBITDA Margin 9.6 8.4 8.8 9.5 10.4
Reported PBT 26 54 73 106 152
EBIT Margin 6.9 6.4 6.9 7.7 8.8
Non-operating & EO items -13 -18 -17 -18 -21
APAT Margin 1.1 2.6 3.0 3.9 5.0
Interest Expenses 68 46 42 39 35
RoE 2.4 6.0 6.7 9.2 12.1
Depreciation 51 49 49 52 55
RoCE 13.2 12.7 14.2 16.8 19.8
Working Capital Change 7 -75 -51 -81 -72
Solvency Ratio
Tax Paid -12 -14 -22 -32 -46
Net Debt/EBITDA (x) 3.6 3.4 2.5 1.8 1.4
OPERATING CASH FLOW ( a ) 126 42 74 65 103
D/E 0.9 0.6 0.5 0.5 0.4
Capex -2 -20 -20 -35 -70
Net D/E 0.8 0.6 0.5 0.4 0.4
Free Cash Flow 125 22 54 30 33
PER SHARE DATA
Investments -28 -1 11 3 -2
EPS 0.6 1.4 1.8 2.6 3.7
Non-operating income 13 18 17 18 21
CEPS 2.6 3.2 3.6 4.5 5.7
INVESTING CASH FLOW ( b ) -16 -3 7 -14 -51
BV 24 26 28 29 32
Debt Issuance / (Repaid) -64 -83 3 7 9
Dividend 0.25 0.25 0.45 0.75 0.90
Interest Expenses -68 -46 -42 -39 -35
Turnover Ratios (days)
FCFE -8 -107 15 -1 7
Debtor days 111 112 107 102 98
Share Capital Issuance 0 2 0 0 0
Inventory days 119 95 93 90 90
Dividend -8 -8 -14 -24 -29
Creditors days 65 57 59 61 63
FINANCING CASH FLOW ( c ) -140 -135 -53 -55 -55
VALUATION
NET CASH FLOW (a+b+c) -30 -96 28 -3 -2
Source: Company, HDFC sec Research P/E 96.8 39.1 31.3 21.6 15.1
P/BV 2.3 2.1 2.0 1.9 1.8
EV/EBITDA 15.3 15.9 14.0 11.4 9.2
EV / Revenues 1.5 1.3 1.2 1.1 1.0
Dividend Yield (%) 0.4 0.4 0.8 1.3 1.6
Dividend Payout 42.9 17.3 25.0 28.7 24.1
Source: Company, HDFC sec Research

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HBL Power Systems Oct 30, 2017

Rating Chart

R HIGH
E
T
U MEDIUM
R
N LOW
LOW MEDIUM HIGH
RISK

Ratings Explanation:

RATING Risk - Return BEAR CASE BASE CASE BULL CASE

IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 15%
IF RISKS MANIFEST RATIONALE
LOW RISK - LOW & IF INVESTMENT
BLUE PRICE CAN FALL FRUCTFIES PRICE
RETURN STOCKS RATIONALE
20% OR MORE CAN RISE BY 20% OR
FRUCTFIES PRICE
MORE
CAN RISE BY 15%
IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 20%
MEDIUM RISK - IF RISKS MANIFEST RATIONALE
& IF INVESTMENT
YELLOW HIGH RETURN PRICE CAN FALL FRUCTFIES PRICE
RATIONALE
STOCKS 35% OR MORE CAN RISE BY 35% OR
FRUCTFIES PRICE
MORE
CAN RISE BY 30%
IF RISKS MANIFEST
IF INVESTMENT
PRICE CAN FALL 30%
IF RISKS MANIFEST RATIONALE
HIGH RISK - HIGH & IF INVESTMENT
RED PRICE CAN FALL FRUCTFIES PRICE
RETURN STOCKS RATIONALE
50% OR MORE CAN RISE BY 50%
FRUCTFIES PRICE
OR MORE
CAN RISE BY 30%

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 INVESTMENT IDEA
HBL Power Systems Oct 30, 2017

Price Chart

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10
27-04-2016
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27-06-2017
27-07-2017

27-08-2017

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27-10-2017
Rating Definition:

Buy: Stock is expected to gain by 10% or more in the next 1 Year.

Sell: Stock is expected to decline by 10% or more in the next 1 Year.

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 INVESTMENT IDEA
HBL Power Systems Oct 30, 2017

Disclosure:
I, Kushal Rughani, MBA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL
has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.
Research Analyst or HDFC Securities Ltd. Does not have financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or
more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or HDFC Securities Ltd. or its associate does not have material
conflict of interest.
Any holding in stock – No
HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475.

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