HFCL Ltd Reports Stabilised Quarterly Performance Amid Margin Pressures

Quarterly Financial Performance: A Mixed Bag

HFCL’s latest quarterly results reveal a nuanced picture. The company’s net sales surged to a record Rs 1,210.79 crore, marking the highest quarterly revenue in its recent history. This growth is complemented by a peak PBDIT of Rs 228.10 crore and an operating profit margin of 18.84%, the best the company has posted in recent quarters. These figures suggest that HFCL’s core operations are gaining traction, supported by improved efficiencies and possibly stronger demand in the telecom equipment segment.

Operating profit to interest coverage ratio also improved significantly, reaching 3.63 times, indicating better capacity to service debt obligations from operating earnings. Profit before tax (excluding other income) stood at Rs 122.69 crore, while the net profit after tax (PAT) for the quarter was Rs 97.62 crore, both the highest quarterly figures recorded by the company. Earnings per share (EPS) correspondingly rose to Rs 0.64, reflecting improved profitability on a per-share basis.

Financial Trend Shift: From Negative to Flat

MarketsMOJO’s financial trend score for HFCL has improved markedly from -15 three months ago to a neutral 3 in the latest quarter, signalling a halt in the previous downward momentum. This shift from negative to flat performance is a critical development, suggesting that the company may be stabilising after a challenging period. However, the flat trend also indicates that significant growth acceleration remains elusive at this stage.

Areas of Concern: Profitability and Efficiency Under Pressure

Despite the encouraging quarterly numbers, HFCL’s nine-month PAT declined sharply by 48.52% to Rs 133.24 crore, signalling that the recent quarterly improvement has yet to fully offset earlier losses. Additionally, interest expenses for the nine-month period increased by 25.63% to Rs 179.28 crore, exerting pressure on net profitability and cash flows.

The company’s return on capital employed (ROCE) for the half-year was a low 4.75%, reflecting suboptimal utilisation of capital resources. This is compounded by a debt-to-equity ratio of 0.38 times, the highest in recent periods, indicating a moderate increase in leverage. Furthermore, the debtors turnover ratio has deteriorated to 1.96 times, the lowest in recent history, suggesting slower collection cycles and potential working capital inefficiencies.

Stock Price Movement and Market Context

HFCL’s stock price has shown resilience in recent sessions, closing at Rs 68.27 on 4 February 2026, up 2.85% from the previous close of Rs 66.38. The stock traded within a range of Rs 67.38 to Rs 70.12 during the day, reflecting moderate volatility. Over the past 52 weeks, the share price has oscillated between a low of Rs 59.83 and a high of Rs 105.10, indicating significant price swings amid sectoral and company-specific developments.

Comparing HFCL’s returns with the broader Sensex index reveals a mixed performance. While the stock outperformed the Sensex over the past week with an 11.88% gain versus the index’s 2.30%, it has underperformed over the one-year horizon, delivering a negative return of 32.77% compared to the Sensex’s 8.49% gain. Longer-term returns are more favourable, with HFCL delivering 142.95% over five years and 276.14% over ten years, both exceeding the Sensex’s respective returns of 66.63% and 245.70%.

Mojo Score and Analyst Ratings

HFCL’s current Mojo Score stands at 37.0, reflecting a cautious outlook from MarketsMOJO’s proprietary scoring system. The company’s Mojo Grade has been upgraded from a Strong Sell to a Sell as of 17 November 2025, signalling a slight improvement in the risk-reward profile but still indicating significant concerns. The market capitalisation grade remains low at 3, consistent with the company’s small-cap status within the Telecom - Equipment & Accessories sector.

Outlook and Strategic Considerations

HFCL’s recent quarterly performance suggests that the company is navigating a transitional phase. The record-high sales and operating profits are encouraging signs of operational strength, but the persistent challenges in profitability over the nine-month period, rising interest costs, and subdued capital efficiency metrics temper optimism.

Investors should monitor the company’s ability to sustain revenue growth while improving margins and controlling leverage. The telecom equipment sector remains competitive and capital-intensive, requiring disciplined financial management and innovation to maintain market share and profitability.

Conclusion: Cautious Optimism Amidst Lingering Challenges

HFCL Ltd’s flat quarterly financial trend marks a tentative stabilisation after a period of decline, supported by record operational metrics and improved coverage ratios. However, the company’s overall financial health remains mixed, with significant headwinds from declining nine-month profitability, rising interest expenses, and weak capital efficiency.

For investors, the stock presents a complex risk-reward profile. While the recent improvement in quarterly performance and Mojo Grade upgrade to Sell from Strong Sell may signal a bottoming out, the company must demonstrate sustained margin expansion and better working capital management to justify a more positive outlook. Close monitoring of upcoming quarterly results and sector developments will be essential to assess HFCL’s trajectory in the competitive telecom equipment landscape.

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