HFCL Ltd
NSE:HFCL
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
66.45
161.61
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
HFCL Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the HFCL Q4 FY '23 Results Conference Call, hosted by ICICI Securities.[Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Mahendra Nahata. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. I'm sorry for little delay. It happened because of connectivity issues. I'm delighted to welcome you all to HFCL's earning call for the fourth quarter and financial year-ended 2023. I trust that you've got a chance to review our financial results, press release and investor presentation, all of which are available on the website of the company and also on the website of stock exchanges.
During financial year 2023, the global economy faced challenges such as financial market volatility, high inflation, slower growth. However, despite these headwinds, India remains a promising economy and is expected to be one of the fastest-growing in the world.
Telecom industry in financial year 2023 has witnessed significant growth and expansion both in India and globally, with increasing adoption of broadband technologies, including broadband wireless technologies, 5G network rollouts and the growing demand for high-speed data connectivity, driving continued innovation and investment in the sector.
Indian government has maintained a focus on key priorities, such as the nationwide implementation of 5G networks, fiberization as part of BharatNet and NHAI [Indiscernible] and also encouraging participation in PLI schemes to promote indigenous design and manufacturing of telecom and networking products. These priorities have been fueled by all around rapid digital transformation and the amplified need of high-speed data, together with the integration of advanced technologies such as artificial intelligence, IoT and machine learning.
[Indiscernible] predict that the implementation of 5G technology will add $1.3 billion to the global GDP and presents an economic impact of USD 42 billion to the Indian economy by 2030. This backdrop makes us confident to kickstart the new financial year on a positive note. HFCL has been tirelessly working in these transformational areas by designing relevant new technology equipment and thereby also increasing scope of its network services portfolio. These efforts will result in expansion of its addressable market, and will also boost its revenue and profitability.
FY '23 are the year of transformation for HFCL, as we continue with several key initiatives to design 5G and various other broadband wireless products. These products included 8T8R Macro Radio Unit, Cell site routers 2 and 4 gigabit per second point-to-point and point-to-multipoint unlicensed and radio, indoor and outdoor small cells, outdoor fixed wireless access customer premises equipment and various kind of aggregation routers. All these products are scheduled to be launched during the current financial year, and are expected to have huge demand opportunity globally. Launch of these products will bring in higher revenue and profitability to the company in the coming years.
Recognizing the company's efforts and initiating and designing of telecom instruments, government of India has already sanctioned designing the incentive up to INR 650 crores to the company.
Furthermore, the company has entered into some crucial technology partnerships with Qualcomm, Microsoft, Wipro for developing cutting-edge 5G products and solutions. These partnerships are boosting our company's R&D capabilities and are also helping to develop and productionize new products at much faster pace.
During the year, we also strategically focused our expansion in key global markets like United States, Europe and Middle East. It is our aim to become a global player in optical fiber cable, telecom and network products and system integration space. Our continued focus on creating and expanding capacity and tap in new geographies not only led to an increase in share of product revenue to 56% in FY '23, as compared to 43% in FY '22, but has also resulted in the increased share of revenue from private customers to 83% in FY '23 from 68% in FY '22. These are 2 very important achievement.
We are currently operating in over 30 countries with 80-plus clients and building long-term relationships across large and fast-growing markets. For achieving higher export revenue, persistent efforts are being led by the company by appointing employees and [Indiscernible] distributors in key markets like France, Germany, England, Poland, Australia, UAE, Turkey, Kenya, United States and several other places. All these endeavors have added significant increase in our export revenue during FY '23 to INR 817 crores from INR 363 crores in FY '22. We still see a growth of 125% on a year-on-year basis.
One of our significant development in the quarter, our collaboration with Microsoft, launched private 5G solution for enterprises. Our partnership will help us offer highly scalable and rapidly deployable solution for enterprises. We foresee the private 5G network can offer numerous benefits to the manufacturing sector, including increased productivity, improved efficiency and cost savings and another enterprises in the industry 4.0 value. The company will pursue developing use cases on these areas of integrated solutions to enterprises, which will lead to competitive advantage to the company with improved profit margin.
We are proud to share at HFCL has emerged India's first enterprise [Indiscernible] and deployment of world broadband alliances, open roaming access its entire WiFi portfolio. Currently, we are working with multiple telecom operators in India and a few other countries to deploy open roaming, and we have plans to scale its reach across the globe and make the most of the first-mover advantage.
In quarter 4 FY '23, we signed a distributing agreements with EPS Global to extend our footprint in global markets such as North and Central America, Europe, Middle East and Africa. Through this partnership, we are tapping new markets for our products and solutions, [Indiscernible] for advanced indoor and outdoor WiFi 6 access points and commercial and industrial switches, high-powered gigabit PoE plus injectors and world's open source enterprise-grade WiFi 7 access points amongst others. Further, HFCL has also signed an exclusive distribution agreement with U.K.'s leading distributor, Purdicom Limited to further strengthen its footprint in the U.K. and [IN] markets.
We have also entered into a strategic partnership with 6WIND a leading government tech networking -- green tech networking company for optimized, sustainable and cost-effective 5G solution based on innovative and market-leading virtual [Indiscernible] and software products.
The government of India, at the same time, is doing a commendable job to faster the deployment of 5G networks and rollout of OFC network in the country. HFCL is working to capture a larger share of the expanding optical fiber cable market. It is projected to reach a cumulative value of USD 250 billion worldwide and USD 10 billion in domestic market during the period of financial year 2023 to 2028.
In order to further strengthen the supply chain and improve the profit margin, the company is expanding its optical fiber capacity for existing 10 million fiber kilometers to 25 million fiber kilometers by quarter 2 of FY '25. With this extended capacity optical fiber, company is expected to generate additional profitability of INR 150 crores every year on an annualized basis, computed at prevailing market price vis-a-vis current cost of inhouse production of optical fiber.
In addition, the company is also in process of [spending] its optical fiber cable production capacity from 25 million fiber kilometer to 35 million fiber kilometer. This expansion will also lead to a significant increase in revenue and profitability.
The company has also created a center for excellence for development of new types of optical fiber cables in its manufacturing facility in Hyderabad. These new types of cables are expected to further increase company's revenue for export market.
The company's subsidiary HTL Limited, has also developed technical optical fiber cables required for different sources.
I also wish to update you all that the development of various 5G radio access network and transport products is progressing well. And we will be launching 5G fixed wireless customer premises equipment, 5G Small Cell, 2 and 4 gigabits per second point-to-point and point-to-multipoint Backhaul UBR, routers of various capacities and 8T8R Macro Radio Unit macro during current financial year. Total addressable market from such products worldwide is expected to be USD 550 billion by 2028. Companies in process of setting a facility for the manufacture of these products and targeting a revenue of INR 800 crores to INR 1,000 crores in FY '24, '25 compared to only INR 130 crores achieved in FY '22, '23 from existing product portfolio.
These products are also eligible for PLI incentive of up to INR 650 crores over a period of 4 to 5 years as per approval received by the company from Government of India.
Increase in revenue from these products, which are own designed and own manufactured will also lead to higher margin and profitability.
This quarter, the fourth quarter effort [Indiscernible] HFCL wining some key purchase orders. As a result, our order book has grown to more than INR 7,000 crores as compared to INR 5,300 crores in the same quarter last year. Some of our major wins in the quarter have been contracts of INR 283 crores from Gujarat Metro Rail Corporation Limited and with the INR 575 crores from Reliance [Indiscernible] Telecommunication.
Let me now brief you on the key performance metrics for 12 months ended on March '23 and also quarter 4 FY '23. For the 12 months ended 31st March '23, the company reported consolidated revenue of INR 4,743 crores as against INR 4,727 crores in March 2022.
EBITDA INR 664 crores as against INR 690 crores in March 2022. Profit before tax of INR 430 crores as against INR 440 crores in March 2022. And profit after tax of INR 317 crores as against INR 326 crores in March 2022.
Revenue in quarter 4 of FY '23 stood at INR 1,433 crores as compared to INR 1,086 crores in FY '23 and INR 1,183 crores in quarter 4 FY '22 with an increase of 21.13% on year-on-year basis.
EBITDA for the quarter stood at INR 168 crores as compared to the INR 194 crores in Q3 FY '23 and INR 150 crores of Q4 FY '22.
EBITDA margin stood at 11.7% for quarter 4 of FY '23 as compared to 17.8% of quarter 3 FY '23. And it stood at 12.99% at quarter 4 of 2022.
For quarter 4 FY '23, profit after tax stood at INR 79 crores as compared to INR 102 crores of quarter 3 of FY '23 at INR 68 crores in quarter 4 of FY '22.
PAT margin stood at 5.49% in the quarter under consideration, compared to 9.36% of quarter 3 of FY '23 and 5.76% in quarter 4 FY '22.
Segment revenue for telecom products during the quarter stood at INR 654 crores as compared to INR 693 crores of quarter [Indiscernible] and INR 585 crores in quarter 4 FY '22.
While margins during quarter are low compared to previous and cautionary contracts due to the execution of some low-margin contracts in the quarter. The overall margin for FY '23, however, intact despite increased input costs and supply chain disruption followed by Russia, Ukraine war and other global economic challenges. The margin at [Indiscernible] particular quarters due to the nature of contracts executed, bidding proposition, et cetera. Our overall EBITDA margin range is between 14% to 15%.
With various strategic initiatives such as expansion of capacity, launch of indigenously designed products, continued backward and horizontal integration, investment in R&D and geographical expansion, operational margins are aimed to be increased by 4% to 5% in 2 years' time.
The current growth we witness in the telecom market worldwide brings optimism and new opportunities. We look forward to financial year 2024 and beyond with great optimism as our strategic initiatives are expected to build significant growth in revenue and profitability.
At the end, I would like to reiterate that we remain focused on our region to become a leader in our industry. And with all initiatives being undertaken such as [Indiscernible] R&D, backward integration, capacity expansion, geographical expansion, developing margin-accretive new products, we are confident that these strategic initiatives will position us for long-term success. Our team is dedicated to delivering value to our shareholders, and we'll continue to work tirelessly to achieve our goals.
Thank you once again for your key participation. With this, I conclude my opening remarks and open the floor for question-and-answer session. Thank you very much.
Thank you very much, sir. [Operator Instructions]
We take the first question from the line of Mr. Balasubramanian from Arihant Capital.
My first question, like we are launching around 7 to 8 5G products from Q2 FY '24 to Q1 FY '25. What would be the telecom revenue share is expected to reach in FY '25? And in the last 2 quarters, Telecom Products margins are around 19%. We may expect about 20% kind of margins to do these new launches. These are my first questions.
As I said, the telecom and [Indiscernible] revenue started to reach INR 800 to INR 1,000 crores in FY '25. And this significant growth is going to come from new products which we are launching.
As I've said in my opening remarks, a number of new products are going to be launched in the current financial year and they are in advanced stage of development. So once these products are launched, they are definitely going to increase multiple times and it is targeted at INR 800 crores to INR 1,000 crores in FY '25.
And number two, as a margin concern. The products are our own designed and manufactured. It's certainly a manufacture margin. Certainly, we have much better margins than 19%.
Okay. Got it, sir. Sir, in Q4 FY '23, turnkey contracts witnessed margins less than 5%. Any specific reasons for that?
Many times contracts are designed in such a way or bidding is done in such a way that in a particular phase, the profitability is higher because payments are received earlier [Indiscernible]. And some sales, the profitability is lower. So it varies, margins on EPC contracts and it varies on quarter-on-quarter, depending on the type and part of contract [Indiscernible] particular quarter.
So what happens in this particular quarter, the EPC contracts which have been executed, the part of that was at a lower margin. So you see lower margin in this particular quarter. It is a bit of an aberration also, but it has happened like that.
However, overall EBITDA margins in turnkey project ranges between 8% to 12%. Now with increasing share of revenue from product business, EBITDA margin [Indiscernible] also increasing year-on-year to year and currently ranging between 14% to 15%. The margins are now trying to increase further in high level backward integration and introduction and launch of indigenously [Indiscernible] products on an overall basis. But turnkey margins, this particular quarter it was low because particular types of contracts. So -- but however, the overall margins are intact and it will increase in future.
Okay. Got it, sir. Sir, on the railway side, recently we won -- we got Surat Metro Rail project Phase 1. Like any further tender or projects are lined up? Like how we are comfortable to execution on railway projects? Because nowadays railway projects are more competitive and margins are slightly lower. So what's your thought process on that, sir?
We have got a very pre-eminent position in railway communication business in the country in a sense that not only we have executed the contracts in India, but we have executed contracts in other companies also like Mauritius, Bangladesh. So we will continue to be in this business. And also the margin vary from contract to contract. Yes, it is competitive. But it [Indiscernible] good revenue and profitability both.
As far as Surat Metro contract, this will be executed as planned, and we are bidding to many other contracts also, different metros -- where metro extensions are coming up or new metro lines are coming up. We are confident that we should be able to get more orders.
As you know, Kanpur and Agra Metro, we have got direct orders, they are already getting executed by us. And similarly, we are working on various other metro contracts where we expect a reasonably good order position.
Sir, on the margin side, on railway projects, like how the margins are.
It is something like terms and contracts only. Only problem is the railway project is the revenue comes late in a sense that telecom is the last thing to be done. And the contracts are awarded when the metro is planned. Then civil work is done, electrical work is done, and all kind of [Indiscernible] and then this telecom business comes up. So it's not that you got the order and it will be getting executed in 1 year. It will take 3, 4, 5 years to get it executed because the civil work and all that in the metro takes time. So margins are like [Indiscernible] contracts, average margins [Indiscernible] 14%, 15% without doubt, it is like something like a turnkey project only.
Okay. Got it, sir. Sir, on the CapEx side...
May we request to join the question queue, sir, as we have multiple participants.
We take the next question from the line of Mr. Sanjay from KSA Securities.
Sir, I wanted to understand how do you see the global [web socket]? And what is the likely impact on the company's performance going forward? You stated...
Can you repeat your question? I missed few words.
Right, sir. Sir, actually, I wanted to understand how do you see the global OFC market? And what is the likely impact [Indiscernible] going forward? We increased our export share from 7% to around 17% of revenue mix. So any color you can give on the OFC segment of the global market?
Yes, I can take it. Look, the one thing which has happened in the global OFC market, particularly after pandemic, this demand of high-speed data has grown and work home culture, even after end of pandemic has so widely spread that there is a huge need of data in every home. Subsidies are being given by many countries to have high-speed data availability at every office, every home where it is not there or either the less speed data is available.
For example, I'll give you U.S. They announced subsidy of USD 61 billion to connect homes over fiber optic cable. $61 billion, just to connect homes on fiberoptic cable, but these kind of numbers for fiber optical connectivity to homes and offices has increased the demand of fiberoptic cable worldwide, coupled with implementation of high speed wireless networks like 5G, for example, some other 6G or other network come in future. So demand of optical fiber cable has increased quite a bit, and it is expected that it will keep on increasing every year the current consumption is about 600 million fiber kilometers. It is expected to reach 750 million fiber kilometers in 3 years' timeframe globally.
And similarly, demand in India has also picked up because of large scale implementation of 5G as well as FTTH network majorly being done by Reliance Jio, the demand has picked up. So globally, there is an increase in demand in fiberoptic cable.
So what HFCL is doing in this case. One, we're increasing our capacity of 25 million fiber kilometer to 35 million fiber kilometers per annum for fiber optic cable. And for the fiber itself, from 10 million fiber kilometer to 25 million fiber kilometers. Both of these are under progress at this point of time. Fiberoptics -- for the optical fiber, once you produce such high capacity of fiber completely making additional profit because currently I'm going by the current data, the current rate difference between own manufactured fiber and the fiber which we got from outside, there is difference of INR 100. So once they produce additional 15 million, pay the benefit of INR 150 crores to the company on every year basis.
So demand of optical fiber cable worldwide has picked up significantly and company is increasing the capacity to meet demand from its customers.
Now coming to exports what you asked, we have grown our export consistently every year.
Right. So my second question would be, are you taking any...
[Technical Difficulty]
Ladies and gentlemen, the line for the management team has disconnected. Please stay connected while we connect them.
Ladies and gentlemen, we have the line for the management reconnected. Mr. Nahata, you may go ahead, sir.
Yes. Sorry, I'm in U.S. at the moment and somehow the lines are malfunctioning. So anyway, so -- what I'm saying is that with the increase in demand of optical fiber cable worldwide, we have taken effective steps to meet the demand of our customers, our exports have increased by 125% in the last financial year which we believe that INR 837 crores of export, we are targeting the fiber optic cable export itself between INR 1,300 crores to INR 1,500 crores in the current financial year, which is financial year '23-'24.
And these exports are going to increase further in the next financial year with the export of networking and telecom products we propose to start, which we are believing in the market, and manufacturing in the current financial year progressively. So optical fiber cable good proposition, good opportunity and company is making out good profits from this opportunity and increase in revenue also.
We'll take the next question from the line of Mr. Jigar Valia from OHM Group.
Just a follow-up to the discussion that you're doing. So basically any -- are you not seeing any recessions, et cetera across in markets like Europe, U.K. or maybe some U.S. to affect, I mean, you're looking at exports to be a little robust only for current year as well as next year.
Look, I don't foresee any recession as such. There may be -- demand maybe stagnation for some time, stagnation in a sense that if you are selling worldwide demand is 50 million fiber kilometer per month, it may remain 50 million, it may reach to 60 million in a particular month, but stagnation is not expected. The demand of 600 million, which is there will continue.
However, capacities have increased worldwide. No doubt about that. Capacity has increased because the demand has increased, every manufacturer has increased capacity. But [Indiscernible] export is who is able to get the market share. So what HFCL is targeting to get a market share, miniscule to the whole worldwide market.
So we don't see any problem in reaching our target of INR 1,300 crores to INR 1,500 crores in the current financial year because we have gone into the additional markets, in the countries we are operating through our sales people, our own employees or agents. We have increased the number. More significantly, we are working on United States at this moment. U.S. had a different kind of cable requirement, which we have developed, and this year we expect some significant revenue to come from the United States.
So in our case, we are increasing the geographical -- we are having geographical expansion and within countries going to more customer. And major markets like U.S., which we had not entered into until last financial year, we are now entering into those markets. So I don't foresee any reason to see that we will not be able to meet our target. Like last year, we were able to do more than our target. And I think this year also, we will definitely be able to meet our target.
So fair to assume that exports can be more than 20 -- 25% of the overall going ahead?
When I say that about INR 1,300 crores to INR 1,500 crores, yes, it can be around that number. I would not commit on exact 25% or 27% or 22%. But yes, it will be around that number, surely.
If you can give some perspective with regards to margins in export markets or overall with the increasing the optic fiber capacity. So how should one look at incremental EBITDA or overall margins playing out in [Indiscernible].
Look, in terms of net margins, net margins on optical fiber cable export -- and on an overall basis, it will vary from contract to contract. But overall basis, 10% should be the number you should take into account for calculation of margins on exports overall basis. Net margin is about 10%, you can measure.
Okay. And at an EBITDA level, it would -- or it depends on contract? Or would it be kind of any different from the domestic business?
Again, as I said, it depends on contract to contract. Sometimes, the contract will give you less margins, sometimes more. But inherently, export margins are bit higher than the domestic margins because...
Working capital...
Go ahead.
Working capital cycle for exports would be?
Generally, the payments are working capital, you can say 90 days payments. Generally the payments on the customers are 90 days.
90 days, got it. And sir, last question from my side. Would be the free cash flow positive this year? Or when can...
I definitely expect that this year we should see cash flow positive. Only issue I would like to raise is that we have been incurring CapEx also, expansion in fiber, fiber optic cable, R&D investments. So those are targeted for long-term growth. So even if we are not cash flow positive in a particular year, the point is we're making substantial investment versus growth. And what we have seen, like, for example, whatever investments are being done now are bringing in results, many R&D investments, a lot of R&D investment has been done which is bringing new products in the current year. And this has been an additional revenue profitability.
Fiber, for example, as I told you, that we are increasing capacity by 15 million, which will cost us around INR 300 crores -- around INR 300 crores, but that is expected to bring in INR 150 crores of profit every year because of price difference has been manufactured and on domestically our own produced fiber.
So I would not be that much concerned about this year's cash flow positivity because these investments are going to get, but they are going to bring in long-term profitability to company in a very near future.
[Operator Instructions] We take the next question from Mr. Saral Seth from Indsec Securities & Finance Ltd.
Yes. Sir, thanks for the opportunity and congratulations for a good set of results. So my first question is how company is likely to achieve higher revenue with initiatives taken through its R&D procedures? So I want to understand how R&D is going to play an important role for increasing our revenue.
Look, I said this is -- R&D is going to play most important role in increasing the revenue as well as profitability. You have to understand that. There are 2 ways to go bring in new product, either you have a collaboration with somebody or you design your own products. So if you design your own product, inherently they have higher profitability, and we are not restricted to a particular market, you can sell it anywhere.
So what we have done in our R&D designing is good number of telecom and networking products, which as I said, one line is led by WiFi and UBR kind of equipment. Second is 5G-related equipment. And some of the equipment which can be used in both cases.
Now with this is kind of an R&D infrastructure where we have got our own R&D for telecom equipment and [Indiscernible] products in Bangalore and Delhi. And also, we have partnerships for R&D contracts we have given to companies like Wipro, companies like [Indiscernible], companies like Capgemini, those kind of companies where we have given R&D contracts. New products have come at a faster pace.
Now what is happening with this? These products, once they come in, not only we will be able to meet the demand of operators in India, but we will also be able to meet the demand operators abroad. We have already started quoting for these products to different operators.
So as I said, what we are expecting -- these R&D-related products will bring in additional revenue of roughly over INR 800 crores to INR 1,000 crores in the financial year '25 itself. Financial year '25 itself, and if you've seen compared with the current revenue from this policy on INR 138 crores, so with the launch of new products, this product which I'm talking about, revenue is to increase significantly. And because these are our own designed products, inherently, they have a higher margin, our profitability will also increase significantly.
So this is a very transformational step company has taken in designing these telecom products locally because this will give us higher margins. And moreover, on the top of it, there's PLI incentives, given by Government of India to ascension to us for INR 650 crores. All these are going to add into the margin of the company.
Moreover, second thing what we are doing, R&D is not limited to telecom and [Indiscernible] product only, it is the cables also -- fiber optic cables also, we are doing a lot of R&D. We have got our R&D center for this in Hyderabad. And also at the same point of time, R&D people in U.S. also who are helping with the design various new kind of cables which are required in the export market.
So with this design of new kind of cables with new construction, we are able to get higher market share in the fiber optic cable market. So R&D is playing a significant role in increasing revenue and profitability growth.
Understood. Sir, when we say that we are procuring products from our partners like Wipro, Capgemini, are we paying any royalty to them? Or how is this accounted for, sir? Or it's like...
These are contracts R&D's where 1 or 2 cases, we may be paying small royalties, but this is our own IPR. They're designing for us. We've given them contract to design the product for us and transfer the design and IPR completely to us. And our own team is totally involved in designing those products with those R&D partners.
Understood, sir. Sir, you've given a good color on the margin, but I want to understand what could be the blended FY '24 margin outlook and what steps are we taking to sustain the current profitability level which has seen a huge increase over the last couple of years?
Look, we have taken, as I said in my presentation, few very important steps to increase our revenue and profitability both. And I will describe these 4 and 5 steps which are really transformational steps and need to be understood clearly that these steps which we have taken are positively going to effect the working of the company. Now what are the steps?
One, what we thought of strategy of company, 1, high [importation] R&D, design owned products, increased revenue from them and they will bring in more profitability and higher addressable market. So bigger market opportunity, higher profitability, increased revenue, which is the product we are explained in detailed earlier question.
Second step we have taken, increased our revenue from private operators. As you have seen, we have gone to 83% now in our revenue from private operators, which used to be less than 30% to YES Bank, it is 83% now. Broadband revenue is only 17%.
Third what we have done, increase our revenue from products then by EPC contracts. What we are seeing this year, revenue from products about 56%, 57%, which used to be much lower than that a couple of years ago.
Fourth, what we have said that we need to increase our exports. So exports this year has increased from INR 360 crores to INR 837 crores, which is increased 125% year-to-year on basis.
And then capacity expansion, including backward and higher backward integration. Now fiber capacity is increased by 15 million and that will bring in additional profitability of INR 150 crores that's expected to be going to the difference in the current prices and increase in cable capacity which is going to be higher revenue and profitability both.
So this steps, export increase, market size increase, our own products, higher-value creation products, going to more to the private operators, going more to the products than the EPC contracts, all these are bringing in higher revenue and profitability. And it's sustainable for long term for the company in terms of increase in revenue and profitability both.
Sir, can you share your capacity utilization on a blended basis for the quarter and the full year?
Capacity utilization in fiber optic is almost 100%, all our factories are working 24/7.
We'll take the next question from the line of Mr. Sahil Sanghvi from Monarch Network Capital.
Thank you for [Indiscernible] for a very good business plan. I have mainly two questions. First, you have an order book of INR 7,000 crores. Can you just split in how much is product-based orders and EPC orders? And also geography export and on...
One thing I would like to make clear that our product revenue, product orders are received on a regular basis. We're not like EPC contracts where you receive an EPC contract of INR 2,000 crores and that is executed over 5 years' time frame. It is the product -- those EPC contracts, those orders are of different kind. But when you come to a product order, they are received on regular basis, like for example, fiber-optic cable, you keep on receiving orders INR 60 crores, INR 80 crores, INR 40 crores, INR 30 crores, INR 100 crores, you keep on receiving orders like that. Whereas the orders for this contract, EPC contracts come in bulk. So orders would not reflect the current position. But in terms of order book right now, I would say, just let me get the numbers. In terms of orders, I would say, about 70% orders are of EPC contracts, 30% would go into product contracts.
Right, sir. And this product-based order proportion will keep on increasing, right? I mean, once we -- next year, we launch.
Yes, this will increase. This will definitely increase because of increased number of products which are being inducted and also at the same quarter increase in capacity.
But let me tell you one more thing. In terms of revenue if you see, the position is reverse. Product based revenue is [Indiscernible]. So that is a difference I want to talk about that orders does not represent real revenue. Orders are EPC contracts or bulk orders coming at 1 point of time. Product orders are coming in a small -- large number of orders, but small quantities. So that's how you see that difference.
And what would be the export domestic mix over year?
Export and domestic mix, our export has been about 17% of the revenue. 83% has been domestic. Last year, it was 7% and 93%. It is now 17% and 83%. What we are targeting to reach to 25% in the current financial year around 25%.
Right. And my second question would be, you said the margin sort of trajectory that you make in these telecom products, what could that be? I mean, I understand it differs product to product, but what range can we expect for these telecom products?
It differs from product to product, you're right. Because some products which are highly competitive and number of manufacturers are more, but demand is high, the margin is less. So generally, it will vary. Generally, the net margins will vary between 15% to 20%, generally.
15% to 20% is the net margin number.
Net margin.
And EBITDA would be, sir, any idea?
EBITDA could be around, I think, 35% to 40%.
We take the next question from the line of Mr. Hemang Kotadia from Anvil.
Congratulations for the good set of numbers. Sir, I wanted to ask, when will the defense product revenue contribution will rise significantly -- in which year actually, where we'll see...
Defense, as I've said in the last conference call also, it's a market with a lot of perseverance is required. What we are doing, working on various products, which includes electronic fuses, this includes upgradation of [Indiscernible], which includes night vision sides, all 3, 4, [Indiscernible] through software-defined radio, these kind of products. But I don't expect any significant revenue coming in that '23, '24. I expect revenue starts showing up '24, '25. But when it shows up, it is going to be a highly sustainable because -- and it is difficult for us to enter into the market, it is going to be difficult for us to enter into the market.
What are the products which you have gone ahead with, night vision sites for the small arms, which is for rifles and light machineguns, we have designed ourselves and with Cell Micron technology, where the core has also been designed by [Indiscernible] any company in India would have designed 12-micron core, and worldwide also not many companies have designed 12-micron crores. And we are now going into the next version, we are going to be working on 8 micron core also, but there is a part. So this 12 micro core based night vision device, it is already quoted in tenders. We have already participated in tenders. And I expect to get some orders in the current year which we would start fulfilling in the current year. So some small revenue may come up from these contents. But higher revenue, I expect starting from next financial year only.
It is a long time for testing trials, all kind of things. So night vision devices, upgradation of BMP-2, freezes all takes time. So we have to invest money. But finally, the return would come and it would be a long-term sustainable.
Right. So what is the annual demand from the like Indian defense industries for this kind of product in numbers?
I think -- I don't have currently number right now, but out of a defense budget of INR 250,000 crores, they are spending about 40% on capital acquisition. So you can easily say 1 lakh crore is being spent -- 1 lakh crore plus is spend by government of India in acquisition of arms every year.
Now the government is all the time saying increased production of this arms and ammunition indigenously. And there is a huge impetus on that, huge impetus on that. And which is resulting in increased domestic production and domestic acquisition of this arm. So though we are the late entry -- but whoever are there in the market, they are having increase in their revenue and that would be in our case also because we have entered late, but the products are coming up. So demand is fortunately huge, and government is now saying produce indigenously. So indigenous demand will go very high, which is good for us.
So is it possible we can achieve like [Indiscernible] crores of turnover from defense product in like, let's say, next 5 years annually?
It is very difficult to commit like that. But yes, I can say that opportunity is good, and we can definitely target INR 800 crores to INR 1,000 crores of revenue in the next 4 to 5 years. We can definitely target. It all depends upon how the contracts are finalized. But yes, 4 to 5 years, we can definitely target because we have done a huge amount of work in defense electronics. So we can definitely target.
One of the products, we have already started bringing in the market, the Radar. We have already designed and bring into the market where customer presentation are being done, but the surveillance that are [Indiscernible] and critical infrastructure protection for short range, medium range, long range [Indiscernible] all have been developed -- designed and developed by us. Higher technology, latest technology radars, which are already in the market.
Yes. That's great if we achieved INR 1,000 crore numbers for 4 years.
So we definitely can target.
Right, right. Sir, my next question because coming here is the election year for India. So how [Indiscernible] your EPC and the basically order book side of the business where we can have a large contract.
I don't see election will much impact these numbers. These EPC contracts -- you have customer demand base. Private operators are not impacted at all. They would do, give contract as they require. Yes, government contracts sometimes are at an increased pace before the -- 1 year before elections because government would like to show the completion of more projects when the election comes, it is natural for any government, state or central government. So yes, that may have some increased award of contracts. But yes, I don't see any major upheaval in like.
And sir, my last question, for FY '25, what kind of console revenue vision, what we are aiming for actually at a company level. So what kind of...
The INR 3700 crore revenue which we have achieved in the current financial year, we are definitely aiming for increase in about 15% to 20%, definitely increased because of the increased capacity and bringing new product 15% to 20%, of course.
We take the next question from the line of Mr. Rakesh Roy from Omkara Capital.
Sir, my first question is regarding the different business, sir. Sir, how much margin we are making in different business?
So look, Rakesh, as I said, we have not started making revenue on the defense business. So there's no question of margin right now. Once the defense business starts and revenue start incurring, yes, I expect something like 15% margin to net margin to come from this business because this is so difficult to enter in, entry barriers are so high. So at least you would make 15% margins in the defense business when the revenue starts coming up.
Okay. Sir, are we looking any joint venture with any foreign player to bring in new technology for in India or for...
No, no. Right now, we are not looking at any of such joint venture. Discussions keep on going on, a number of companies. And these are going on at this point of time. But these are not any serious levels where I can say that we are bringing this or that. Our more emphasis is to develop products indigenously. So that even if you have a small number of products, maybe revenue is less, but your profitability is high. So that's the way we are with.
Okay. Sir, in defense business and defense product, we would directly bid to government or we get order from the other place like BEL or like this one?
So mostly, we are directly bid into the Army and this kind of contract, not BEL and all that. There's a couple of orders have come on turnkey -- which are soon, not soon some other PSU has got and he got orders from them. 3 agreed terms and condition. [Indiscernible] we have got a contract for one of the Air Force networks about INR 300 crores which is under execution. But yes, other equipment like thermal weapon sides and all that, we have been directly.
[Operator Instructions] We'll take the next question from the line of Mr. Balasubramanian from Arihant Capital.
Sir, on the balance sheet side, operational buyers credit and supplier credit has increased to INR 14 crores to INR 168 crores in FY '23. Could you please share more details in that balance sheet item?
Balasubramanian, this is a normal business, I mean transition and facilities being offered by the commercial bank. So what happens in some cases, wherever we open [Indiscernible] bank on their own have a scheme to give us a credit of 60 days or 90 days. That is covered under the supply schedule and that is being shown separately in the balance sheet. These deals are against [Indiscernible] that will improve separately.
We'll take the next question from the line of Mr. Dipesh Sancheti from Manya Finance.
Yes. Am I audible?
Yes.
My first question was actually regarding the antidumping duty. Have we applied to the government for any anti-dumping duty for optical fibers because today on a few of the business channels, there was a flash that there might be an antidumping duty and the companies have applied for anti-dumping duty on optical fibers.
We are neutral to this. We have not applied. We are neutral to this because our own fiber optic capacity for production of fiber is going up. So if the duty is more, we have put it, we have no problem. So what has been recommended by commerce needs to the financing to be accepted and finalized. But yes, it has been recommended by [Indiscernible] . So we are quite neutral to this because we produce so much of fiber by ourselves. But even if the duty is there, it does not impact us.
Moreover, the important point is -- but there's no anti-dumping duty on the fiber use for export of cable. If I manufacture some cable for exports, there's no anti-dumping duty there. So when we are importing a lot of it is for exports only. So we would not be impacted by that either.
Domestic market, we produce fiber to address our domestic customers. So we would be rather protected than being harmed in any way. And with our increase in capacity, we have a fiber production. But the problem would be the smaller players. Smaller players who are not producing their own fiber, they would have a lot of a problem because they will have to pay a higher price and their competitiveness will be a little lower. So I really don't support this antidumping duty because people should be competitive enough to face competition. I really don't support. But as a company, we are not impacted.
Okay. So -- but if there is any anti-dumping duty, it will be beneficial for our company since we are integrated in all terms?
I'm neutral to that. I'm neutral to that. And ultimately, it will be beneficial.
Ultimately it will be beneficial. Can you tell me -- can you share the number of how much has been recommended by the commerce ministry?
Just notification came yesterday only. It is different from company-to-company, country to country. So China for an example where most of the fiber is coming, it is some of the companies are about INR 50 per fiber kilometer in terms of transformation, to dollar -- INR 50 -- sorry, $0.50 -- $0.50 per kilometer which should amount to about INR 40, INR 45. Some of them are a little higher, some of them are a little lower.
Okay. As a percentage-wise, how much is it?
you take a price of fiber as $4 on average, it would be about 11%, 12%.
11%, 12%, okay. And sir, my second question, last one is actually, if you can give us a revenue mix product-wise for this quarter or for this year?
If you ask only for the -- if you look at revenue mix for the products or you are talking on overall basis?
Overall basis, as in how much revenues optical cables has done, how much has done being the product?
I can tell you. On a consolidated basis, 57% -- or 56% of revenue has come from products, 44% from turnkey. If you go to the product itself, -- within products 87% has come from optical fiber cable, the rest has come from other areas.
Okay. And this is set to increase in the coming years?
Yes. Two things are going to happen. One, the revenue from other products, telecom and electrical product is going to increase significantly. So overall, revenue from fiber optic cable will increase, but percentage may go down.
Like for example, our optical revenue cable revenue has been INR 2,300 crores in this last financial year which was INR 1,787 crore in the year before that and maybe INR 1,200 crores a year before that. So INR 1,200 crore, INR 1,700 crore, INR 2,300 crores. This kind of number, it is increasing. Current year, we are targeting INR 2,800 crores. Number will increase. But the INR 138 crores of revenue from products, which I mentioned, in 2 years it will go to INR 1,000 crores; INR 800 crores to INR 1,000 crores. So percentage in cable will decline, but overall revenue from cable will keep on increasing in networking products.
And from the current order book, what is the -- how much is the percentage of order book in optical fibers? Yes, INR 7,500 crores order book. How much is the optical fibers percentage?
It is 10%. It is 10% of the total order book currently. And optic fiber [Indiscernible] running order book. So we keep receiving orders regularly and those are executed.
Yes. That's what I said in the beginning. In products, orders keep on coming in small quantities. And they are keeping on being executed. So that is not going to reflect you the percentage of revenue on an overall basis. But yes, orders are there and will keep on coming on a regular basis.
We take the next question from the line of Mr. Hardik Vyas from Economic Times.
I had a couple of questions. The first one is you guided that roughly INR 5,000 crores of PPC order book we have. So I hope that they are not low-margin orders as we saw in the current quarter, less than 5% margin. And they would be of the normal margin kind 8% to 12% margin.
Sure, definitely, Hardik, we have maintained -- on an overall basis, this margin has been maintained. And this was an aberration that particular contract we executed was the low margin in the current -- last quarter. I can assure you that overall basis, the margins are going to be totally intact and in future are going to grow only because we are not taking contracts which are low-margin contracts now.
Okay. So the other question is, sir, what is the idea on OFC pricing? Has the pricing again gone up because of the demand increasing in the U.S. and world over? Or the pricing remains more or less the same?
The price has gone up a bit. I will tell you, the fiber realization per fiber kilometer has been higher. Quarter 1 of the last financial year, it was about INR 1,100 per fiber kilometer for the cable. Now in the quarter 4, we have achieved a number of INR 1,234 per fiber kilometer. Now it does not mean that everybody would have achieved that. It all depends on the mix of the products and how much you've exported, how much you have given to the private operators, how much you have sold in the export market. But generally, yes, it has gone up by let's say, 10% or so. This is a significant number, 10% is very significant.
Yes. Sir, my last question is what is our status on 5G products, the contribution is limited as we speak right now. But how execution is likely to pan out over the next 6 to 8 quarters because a lot of products we are going to introduce in the market in the coming year and the next.
As I said, -- as I said, 5G products are being bought by the company. On another 2 months, it will come -- start coming one by one in the market. So I would say that you will see the products being in market in the next 2 to 3 months [Indiscernible] and all that be done by operators and orders are being placed. Orders would start getting executed probably in quarter 3 of the current financial year -- quarter 3 of the current financial year.
So after they started getting us executive in quarter 3, it will continue overall basis for many quarters to come. They are going to upgrade it, the new demand, is going to be demand from different other countries, different operators, it is going to be increased every quarters.
So this is -- for the products for 5G EPC as well because operators also will be wanting us to do some EPC contracts with them.
So products are products, [Indiscernible] operator contract installation commission included, that is not really EPC. That's not really EPC. That is contract with selling products, including installation commission.
Okay. Okay. So from third quarter of this year on.
Yes, we expect The revenues start coming up.
Ladies and gentlemen, due to time constraint, that was the last question for the day. I would now like to hand the conference over to the management for closing comments. Thank you, and over to you, sir.
Thank you very much to all of you for having patience and listening to the results of the company for financial year ended 2023 and quarter 4 of 2023 and giving me the time and opportunity to explain you what steps company has taken to sustain revenue or not only sustainable, but increase revenue and profitability significantly in future coming years, but still company has taken.
I really enjoyed the questions and I'm sure answers would have given you would have satisfied the queries, which you had. And thank you very much once again for your time for being on the call. Thank you very much.
Thank you, sir. Ladies and gentlemen, you may directly connect to the company for any further questions. On behalf of ICIC Security, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.