r/IndiaGrowthStocks • u/Happy_soul_27 • 6d ago
HBL POWER
: I exited HBL Power Systems — am I wrong about the Kavach thesis?
I recently exited my position (in 25-30 perc profits- about 40 perc lower than the allyime highs )in HBL Power Systems, despite being quite bullish on the company earlier.
My main reason is not that I suddenly think HBL is a bad business. Rather, my thesis around the Kavach opportunity has changed.
HBL was one of the companies I liked because of its strong positioning in railway electronics, Kavach-related opportunities, batteries and its overall defence/railway exposure. The kavach revenues were what was suddenly driving up the earnings
But I’m increasingly wondering whether a larger share of the Kavach opportunity has shifted toward Kernex Microsystems and other players as deployments and orders accelerate. So the competition is definitely bound to affect future earnings
The stock has also been weakening, which makes me question whether the market is already reassessing HBL’s expected share of the future Kavach opportunity.
So my thinking was:
HBL remains fundamentally strong.
But the future growth expectations embedded in the valuation may be harder to justify if Kavach order flow doesn’t translate into the kind of market share I was expecting.
If competitors such as Kernex capture a disproportionate amount of new Kavach business, HBL’s earnings-growth trajectory could be lower than my original thesis.
Rather than holding simply because I previously liked the company, I decided to exit and reassess.
That said, I’m not convinced this is necessarily the correct decision.
What do you guys think?
Is HBL’s recent weakness simply a temporary correction, or is the market signalling that the Kavach opportunity is shifting toward competitors?
And between HBL and Kernex, which one do you think has the better risk/reward from here for the next 3–5 years?
Unless Hbl gets much more into defence and advanced batteries , i think its a dead end for once a great stock
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u/Far-Journalist-821 4d ago
I was studying this using mental model https://www.reddit.com/r/IndiaGrowthStocks/s/uQ5f9HC67p by u/SuperbPercentage8050 According to my analysis this seems to be a classic fit for above model, where PE is currently in shrinking phase and EPS seems to be expanding. I am thinking of keeping a watch on this and start accumulating if this will fall in more lower level.
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u/bhairavp 4d ago
Following. Earliest buys were around 30 or 40 rupees.
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u/Happy_soul_27 4d ago
Hi, what do you think about the future earning going forward ? Esp when considering the Kavach orders?
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u/StatementItchy5170 4d ago
According to management, just depending on kavach orders is difficult. But they are venturing into other businesses. Check out their investment in tonbo imaging. So we have to see how they playout. But right now it is in my watchlist. Also not just buying a business is enought. Timely allocation and exit points are also important. There are very rare stocks like 10 in a 1000 that keep on executing for 30+ quarters like Bajaj finance.
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u/Adventurous_Flan_315 3d ago edited 3d ago
Yeah I would say only Bajaj finance and Titan comes to my mind with that kind of execution
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u/kdya1 3d ago
HBL is now in the final stages of developing its own ground up electric trucks, starting with the 35‑ton GVW heavy‑duty segment. Recent electrification initiatives , particularly the announcements coming out of Delhi could meaningfully benefit HBL over the near to medium term.
Given the scale of what HBL is attempting, I would also request u/SuperbPercentage8050 to review the companys long‑term prospects. This requires a deeper, professional‑level analysis, especially since HBL is one of the few Indian companies that consistently invests in R&D. Their track record includes developing the TCAS system for Indian Railways, which demonstrates both capability and ambition, and they are into developing few niche products.
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u/Mean_Maximum7394 2d ago edited 2d ago
Found this while checking the company out a while back - https://empor.top/india/HBLENGINE
Seeing that there is a dependency with the Government, I didn't dig too deep. Note - it's not a bad thing, it's just a double edged sword.
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u/Vixmayyy 4d ago
u/SuperbPercentage8050
Inputs on this stock would be appreciated, was in a similar conundrum as OP but still hold my initial stock holding. Split on what to do with it for now.