PM Modi's RDSS scheme is proving a boon for this small-cap company; stock has jumped over 200% in 12 months

Stock market today: The small-cap index in the recent past, amid broad market gains, has logged stupendous gains, with HPL Electric and Power (HPL) being no exception. The stock has delivered a handsome return of 240 per cent in the last one year, i.e., nearly trebled investors' money in a short span of a year. 

The company has been continuously bagging orders for smart metres amid the government’s push to implement prepaid smart meters under the Revamped Distribution Sector Scheme (RDSS) in a gradual manner.

The smart meters implementation will enable utilities to reduce power supply costs as well as lower both the ACS-ARR gap and AT&C losses, according to a press release by the Ministry of Power dated December 15, 2023.

Financials

The company's fundamentals look strong, as it posted good performance across all metrics in the December quarter results released recently. The company, after the results released on Wednesday, has hit the 10 per cent upper circuit, adding to the recent gains.

“The company maintains a strategic direction towards sustainable growth in India's adoption of advanced metering solutions, contributing to consistent high-value creation. The Consumer & Industrial segment also saw growth in switchgear up at 28% YoY, with wire & cables growth upwards of 13% YoY for 9MFY24," said the company in its earnings release.

Q3 PAT on a consolidated basis jumped to Rs 11.75 crore during the review period as against Rs 6.38 crore logged in Q3 FY23, logging a substantial 87 per cent increase on year. The profit margin at the company also climbed 115 basis points to 3.27 per cent during the recently concluded December quarter.

The company’s debt-to-equity ratio is also placed below 1, implying the company is safe as its assets are mainly financed through equity. Additionally, the company’s order book stands at over Rs 2,400 crore, which is again a positive factor for the company. 

The company’s investor presentation noted that, with a large product portfolio, HPL is at the forefront of capturing growth opportunities.

Strategically focussed

“HPL Electric & Power Ltd.'s performance in Q3FY24 & 9MFY24 and continued growth trajectory stem from its strategic focus on a diverse range of product segments, including wire & cables, switchgear, lighting, and smart meters. These segments are integral components of housing and infrastructure projects nationwide, positioning HPL as a pivotal player in driving the government’s development agenda,” stated the company’s release to the exchanges.

Government initiatives such as smart metering under the RDSS scheme have opened up substantial opportunities for HPL to expand its footprint across these critical segments, the company added.

How do the technicals look for the stock?

Avdhut Bagkar, derivatives and technical analyst at Stoxbox, noted that while the stock has triggered a fresh upside after a horizontal breakout over Rs 250, the price action must hold this breakout mark to rally in the direction of Rs 325 and Rs 350 levels.

A bearish divergence on the daily chart could derail the positive stance, but the underlying trend remains highly optimistic as it holds ground over the 50-simple moving average (SMA) placed at Rs 268.

On a medium-term perspective, if the price action succeeds in holding momentum over the Rs 300 level, the rally could even extend to the Rs 400 mark, implying gains of 28 per cent from the last close of Rs 313 apiece on the BSE today.