Stock watch: HBL Power nearly triples in 6 months; defence, railway play driving gains

Since September 2022, HBL has also been a part of the consortium working on Indian Railways’ Kavach (TCAS System)

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26 Aug, 2025 12:21

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With a focus on indigenisation and continued favour of power stocks, HBL Power Systems continues to give its investors multi-bagger returns. Over the last six months, the stock has gained over 183.15 percent. On September 29, the stock gained over 5 percent and was trading in the range of Rs 260 to Rs 266 through the day.

Also read: HBL Power Consolidated June 2023 Net Sales at Rs 467.43 crore, up 46.21% Y-o-Y

Drive for indigenisation

In February 2023, HBL Power entered into an agreement to invest up to Rs 150 crore in Tonbo Imaging India, a leading electro-optic solutions provider for defence applications. HBL is also planning an investment in Tonbo Singapore.

According to a HDFC Securities stock note, HBL’s comprehensive manufacturing infrastructure for electronics, mechanical systems, assembly and testing will help Tonbo deliver products to match the rapid growth in its order book. Additionally, the report says that through this initiative, HBL is also likely to leverage the intellectual property strategy and development capabilities that Tonbo brings to the realm of defence electronics. As of date, HBL Power has invested Rs 86.7 crore in Tonbo Imaging.

In the latest AGM, the company has said that it continues to focus on indigenous development of its products, with no foreign collaboration. It is also committed to improving technology through R&D, the results of which will be visible from FY2027. While the company makes in-house advanced software, it does not sell them. The advanced software system is being utilized in Train Management Systems currently.

Government orders also continue to be a source of strength for HBL Power. According an InCred report, the company has supplied to the defence sector for meeting the needs of its naval and underwater bases and has also been awarded a contract by NSTL/DRDO to develop prototype modules for lithium-ion batteries for submarine application. The report adds that there is demand emerging from the Indian Air Force which will be met in the next few years.

Also read: Power On Fire: What’s fuelling the rally in energy stocks?

Since September 2022, HBL has also been a part of the consortium working on Indian Railways’ Kavach (TCAS System). With the Indian Railways’ track length expected to increase by 30,000km over the next few years, analysts at InCred say that this will provide a good opportunity for the TCAS (Kavach - Traffic Collision Analysts Systems) system to be implemented.

HBL is also developing technology for motors and controllers for EV Trucks in India. According to the HDFC Securities note, the company plans to convert old diesel trucks into electric drive using electric drive trains, sales for which may begin in FY2025 after the company completes the testing. The company has also developed electronic fuzes for guns and other ammunition. “The market is huge and the competition limited, with bulk sales expected by end of FY2024,” the report adds.

Strong market presence

According to analysts at HDFC Securities, the company has an established presence in the batteries segment, which continues to grow moderately every year. Since the batteries are replaced every few years, demand is expected to remain stable. Additionally, the electronics segment of the company is a high-margin business and will scale up rapidly, contributing to around 35 – 40 percent of revenue by FY25-26. HDFC Securities has given a Buy call in the band of Rs 265 - 270 and add-on dips in the band of Rs 230 – 235. They add that the Revenue will grow at a 24 percent CAGR, earnings before interest, taxes, depreciation and amortisation at a 55 percent CAGR and net profit growth at a CAGR of 57 over the period of FY2023-FY2025.

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Analysts at Prabhudas Lilladher have also given the stock a buy call. According to the note, the stock after the decent rally has corrected to some extent to retrace 23.60 percent of the rise and has witnessed consolidation with improvement in the bias at current levels. “With the chart looking good, we suggest buying and accumulating this stock for an upside target of 300 keeping a stop loss of 238,” the report said.

According to InCred analysts, HBL Power is banking on TCAS orders, and a likely healthy growth in orders from defence and railway segments. R&D expenditure, the report says would be lower while working capital requirement is likely to increase, given strong sales growth. InCred currently does not have a rating on HBL Power. HBL, the report adds, continues to have a debt-equity ratio of <0.1x and is the only Indian company in the market to have high powered Pure Lead Thin Plate (PLT) battery.

The company, they add also has a strong product portfolio catering to niche sectors apart from defence and railways such as telecom, UPS and solar energy. According to analysts, volatility in commodity prices, growing competition in the battery market and slow implementation of Kavach could prove to be challenging in the coming days.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.