Telecom to Defence – Is HFCL Ready for the Next Big Move?

Fundamental Overview

*Business: HFCL manufactures optical fibre cables, telecom infra solutions, and 5G equipment. It is also expanding into defence manufacturing with 1,000 acres allotted in Andhra Pradesh.
*FY25 Results: Revenue slipped to ~₹4,064 Cr (down from ₹4,465 Cr in FY24), while net profit nearly halved to ~₹177 Cr. Q4FY25 posted a net loss (~₹81 Cr) due to weak OFC demand.
*Valuation: Currently trades at a P/E > 300x, indicating very high growth expectations are priced in.
*Balance Sheet:Debt-to-equity is comfortable at 0.28, liquidity healthy (current ratio ~1.87x).
*Guidance: Management expects 25–30% revenue growth in FY26, driven by strong order book and 5G product demand.
*Strengths: Exposure to 5G & defence, strong order book, low leverage.
*Risks: High valuation, weak recent earnings, promoter pledge (~54%), long receivable cycles.

Technical Setup
Pattern: Weekly chart shows a falling wedge, typically a bullish reversal pattern.
Reversal Zone: Price bounced from the ₹72–75 support band.
Key Level: A weekly close above ₹78 signals breakout strength.

Targets:

• R1: ₹87
  
• R2: ₹100
  
• R3: ₹116
  
• R4: ₹130
  
  Stop-Loss Zone: Below ₹72 (reversal zone invalidation).
  
  Trading Idea
  Swing Trade Setup:
  
• Entry: Close above ₹78 with volume confirmation.
  
• Targets: ₹87 / ₹100 / ₹116 / ₹130.
  
• Stop-Loss: Below ₹72.
  
  Investor View: Fundamentals are a mix of long-term growth drivers (5G, defence) and short-term earnings pressure. Best suited for accumulation near support zones, rather than chasing overvalued levels.
  
  Conclusion
  HFCL is at an inflection point. The fundamentals show sector tailwinds (5G + defence), but valuations and profitability remain a concern. Technically, a breakout above ₹78 from the falling wedge could align with management’s bullish FY26 guidance, opening the path toward ₹100+ in coming months.
  
  Disclaimer:lnkd.in/gJJDnvn2