In This Article:
Himachal Futuristic Communications Limited (NSE:HFCL), a ₹24.4b small-cap, operates in the telecommunications market which is underpinned by technological changes such as improvements in network efficiencies to meet changing consumer needs. Telco analysts are forecasting for the entire industry, a strong double-digit growth of 11% in the upcoming year , and an enormous growth of 39% over the next couple of years. However this rate still came in below the growth rate of the Indian stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Himachal Futuristic Communications is lagging or leading in the industry.
Check out our latest analysis for Himachal Futuristic Communications
What’s the catalyst for Himachal Futuristic Communications’s sector growth?
Innovations and technological developments allow telco companies to be more cost-competitive. Over the past year, the industry saw growth in the thirties, beating the Indian market growth of 22%. Himachal Futuristic Communications is neither a lagger nor a leader, and has been growing in-line with its industry peers at around 37% in the prior year. However, analysts are expecting the company to accelerate ahead of its peers over the next year, and deliver a 13% growth next year. This growth may make Himachal Futuristic Communications a more expensive stock relative to its peers.
Is Himachal Futuristic Communications and the sector relatively cheap?
Telco companies are typically trading at a PE of 14.11x, relatively similar to the rest of the Indian stock market PE of 17.34x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 12% compared to the market’s 9.4%, potentially illustrative of a turnaround. On the stock-level, Himachal Futuristic Communications is trading at a PE ratio of 14.25x, which is relatively in-line with the average telco stock. In terms of returns, Himachal Futuristic Communications generated 15% in the past year, which is 3.2% over the telco sector.
Next Steps:
Himachal Futuristic Communications’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Himachal Futuristic Communications has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Himachal Futuristic Communications’s fundamentals in order to build a holistic investment thesis.