HFCL: Nuvama Initiates Buy with ₹380 Target, Sees 56% Upside

HFCL’s AI and Data Centre Opportunity: Nuvama Sees 56% Upside HFCL is attracting attention for its strategic shift towards telecom and networking products, optical fibre and data centre connectivity. Nuvama has initiated coverage with a Buy rating and a target price of ₹380, compared with its reference price of ₹244, implying a potential upside of 56%. What Is Driving the Growth Outlook? - Product-led transformation: Products contributed 83% of HFCL’s revenue in Q1 FY27, compared with 27% in FY21. - AI and data centres: Growing AI infrastructure spending is increasing demand for optical fibre to connect GPUs, racks and data centre facilities. - Strong order book: HFCL’s order book stood at ₹26,700 crore in Q1 FY27, around 5.4 times FY26 revenue. Products accounted for approximately 65% of the order book, with more than half of product orders coming from exports. - Defence opportunity: Nuvama expects defence revenue to grow from ₹310 crore in FY26 to ₹1,720 crore by FY29. The brokerage forecasts revenue, EBITDA and adjusted profit to grow at CAGRs of 39%, 68% and 92%, respectively, between FY26 and FY29. My View HFCL offers exposure to multiple infrastructure themes, including AI data centres, optical connectivity, exports and defence. The shift towards products and exports could improve earnings visibility and profitability if execution remains on track. However, these projections are ambitious. Investors should monitor global data centre capital expenditure, optical fibre pricing, capacity expansion and order execution. Delays in new capacity or a slowdown in AI-related spending could affect the growth trajectory. The opportunity is promising, but the key question is whether HFCL can convert its large order book and favourable industry trends into sustainable cash flows and earnings.