HFCL 2017-18 Annual Report Analysis

Sat, 31 Mar

HFCL has announced its results for the year ended March 2018. Let us have a look at the detailed performance review of the company during FY17-18.

HFCL Income Statement Analysis

• Operating income during the year rose 55.6% on a year-on-year (YoY) basis.
• The company's operating profit increased by 40.4% YoY during the fiscal. Operating profit margins witnessed a fall and stood at 8.4% in FY18 as against 9.4% in FY17.
• Depreciation charges increased by 6.8% and finance costs increased by 2.0% YoY, respectively.
• Other income grew by 63.9% YoY.
• Net profit for the year grew by 31.4% YoY.
• Net profit margins during the year declined from 6.3% in FY17 to 5.3% in FY18.

HFCL Income Statement 2017-18

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Net Sales	Rs m	20,599	32,062	55.6%
Other income	Rs m	214	351	63.9%
Total Revenues	Rs m	20,813	32,413	55.7%
Gross profit	Rs m	1,929	2,708	40.4%
Depreciation	Rs m	218	232	6.8%
Interest	Rs m	624	636	2.0%
Profit before tax	Rs m	1,302	2,190	68.3%
Tax	Rs m	5	487	9,640.0%
Profit after tax	Rs m	1,297	1,703	31.4%
Gross profit margin	%	9.4	8.4
Effective tax rate	%	0.4	22.2
Net profit margin	%	6.3	5.3

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HFCL Balance Sheet Analysis

• The company's current liabilities during FY18 stood at Rs 13 billion as compared to Rs 10 billion in FY17, thereby witnessing an increase of 23.8%.
• Long-term debt down at Rs 1 billion as compared to Rs 3 billion during FY17, a fall of 47.2%.
• Current assets rose 13% and stood at Rs 21 billion, while fixed assets rose 31% and stood at Rs 3 billion in FY18.
• Overall, the total assets and liabilities for FY18 stood at Rs 25 billion as against Rs 22 billion during FY17, thereby witnessing a growth of 15%.

HFCL Balance Sheet as on March 2018

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*	% Change
Networth	Rs m	9,641	11,607	20.4
Current Liabilities	Rs m	10,235	12,671	23.8
Long-term Debt	Rs m	2,676	1,413	-47.2
Total Liabilities	Rs m	21,529	24,697	14.7
Current assets	Rs m	19,058	21,450	12.6
Fixed Assets	Rs m	2,471	3,247	31.4
Total Assets	Rs m	21,529	24,697	14.7

HFCL Cash Flow Statement Analysis

• HFCL's cash flow from operating activities (CFO) during FY18 stood at Rs 2 billion, an improvement of 52.2% on a YoY basis.
• Cash flow from investing activities (CFI) during FY18 stood at Rs -300 million, an improvement of 19.9% on a YoY basis.
• Cash flow from financial activities (CFF) during FY18 stood at Rs -1 billion on a YoY basis.
• Overall, net cash flows for the company during FY18 stood at Rs 607 million from the Rs -32 million net cash flows seen during FY17.

HFCL Cash Flow Statement 2017-18

Particulars	No. of months	12	12	% Change
	Year Ending	Mar-17	Mar-18
Cash Flow from Operating Activities	Rs m	1,361	2,071	52.2%
Cash Flow from Investing Activities	Rs m	-250	-300	-
Cash Flow from Financing Activities	Rs m	-1,142	-1,164	-
Net Cash Flow	Rs m	-32	607	-

Current Valuations for HFCL

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 1.4, an improvement from the EPS of Rs 1.0 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 25.9, stands at 23.0 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 3.1 times, while the price to sales ratio stands at 1.0 times.
• The company's price to cash flow (P/CF) ratio stood at 15.5 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Sales per share (Unadj.)	Rs	16.6	25.9
TTM Earnings per share	Rs	1.0	1.4
Diluted earnings per share	Rs	0.9	1.2
Price to Cash Flow	x	11.6	15.5
TTM P/E ratio	x	14.1	23.0
Price / Book Value ratio	x	2.0	2.6
Market Cap	Rs m	19,421	30,055
Dividends per share (Unadj.)	Rs	0.0	0.1

Ratio Analysis for HFCL

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 1.7x during FY18, from 1.9x during FY17. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio improved and stood at 4.4x during FY18, from 3.1x during FY17. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company improved and stood at 14.7% during FY18, from 13.4% during FY18. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 21.7% during FY18, from 15.6% during FY17. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company improved and stood at 9.5% during FY18, from 8.9% during FY17. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-17*	12 Mar-18*
Current ratio	x	1.9	1.7
Debtors’ Days	Days	21	13
Interest coverage	x	3.1	4.4
Debt to equity ratio	x	0.3	0.1
Return on assets	%	8.9	9.5
Return on equity	%	13.4	14.7
Return on capital employed	%	15.6	21.7

To see how HFCL has performed over the last 5 years, please visit here.

HFCL Share Price Performance

Over the last one year, HFCL share price has moved up from Rs 12.8 to Rs 25.9, registering a gain of Rs 13.2 or around 103.1%.

Meanwhile, the S&P BSE TECK Index is trading at Rs 6,513.3 (down 0.7%). Over the last one year it has moved up from 5,771.5 to 6,513.3, a gain of 742 points (up 12.9%).

Overall, the S&P BSE SENSEX is up 12.1% over the year.

(To know more, check out historical annual results for HFCL and quarterly results for HFCL)

Read: Latest Annual Report Analysis of HFCL