“We are raising FY27E/28E Ebitda by 9 per cent each to reflect the Q2 beat on earnings and guidance upgrade. Reiterate ‘BUY’ with a Q3FY28E target price of Rs 410 (earlier Rs 380) based on 18x EV/Ebitda. At CMP, the stock trades at 13.9 times FY28E EV/Ebitda on a fully diluted basis,” Nuvama said.
HFCL's record quarterly performance, higher revenue guidance, expanding order book, stronger cash flow and improving working-capital position prompted Nuvama to raise its target price. That said, any moderation in artificial intelligence and data-centre capital expenditure, a reversal of supply-demand tightness, delays in completing HFCL's preform capacity and the unavailability of key raw materials are seen as major risks.
HFCL's revenue rose 144 per cent year-on-year in Q2FY27. Revenue from the telecom segment increased 333 per cent from a year earlier and 46 per cent sequentially, supported by higher volumes and pricing.
Ebida increased 231 per cent YoY, while the Ebitda margin expanded by 710 basis points from a year earlier and 660 basis points sequentially to 24.8 per cent. The improvement was driven by telecom products, although weakness in the turnkey contracts segment partly offset the gains, Nuvama said.
The company's earnings before interest and tax margin, before unallocable expenses, expanded by 810 basis points YoY to 23.6 per cent. The telecom products segment's margin improved by 710 basis points, while the defence business reported a margin of 6.3 per cent.
The turnkey business weighed on revenue and profitability. Its revenue fell 73 per cent YoY, while the segment recorded an EBIT loss of Rs 120 crore, compared with a profit of Rs 35.90 crore in Q2FY26. Adjusted PAT rose 435 per cent YoY and 59 per cent sequentially.
HFCL's order book reached a record Rs 28,900 crore, with exports accounting for 57 per cent. Nuvama said this provided visibility, particularly from hyperscalers, while demand from telecom operators was also likely to pick up.
The company's balance sheet strengthened during the first half of FY27, with net working capital days declining to 155 from 202 previously. Inventory days fell to 75 from 104 in March 2026, while receivable days decreased to 141 from 183.
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