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Company Background
Hindusthan National Glass & Industries Ltd. (HNGIL), incorporated in
1946, is a part of the Chandra Kumar Somany Group. The company is
engaged in the manufacturing of container glass bottles that find
application in industries as diverse as liquor, beer, pharmaceuticals,
food, carbonated drinks and cosmetics among others. The company
has six manufacturing facilities in India and one in Germany.
Investment Rationale
Pan India presence with dominant market share
HNGIL is the only player in the container glass industry having Pan
India presence and a market share of ~50%. It generates ~64% of
sales from North & East region where it already has a strong
presence, however South and West contribute to ~32%, thus
providing significant geographical risk diversification.
Cost efficiencies to contain margin erosion
To improve production efficiency, HNGIL has introduced the Narrow
Neck Press and Blow technology which reduces the weight of glass
by 15 to 35% resulting in cost savings. It has also implemented the
usage of gas at four of its plants and intends to use the same for
remaining plants in near future. Going forward, we expect
EBITDA margins to improve by 229 bps ~FY12-14E to 19.2%.
Capacity addition to drive volumes
HNGIL is implementing a greenfield expansion of 650 TPD plant at
Naidupeta, Andhra Pradesh at an investment of INR 8,250 million
which is expected to be operational by July 2012. It is also adding
another 425 TPD through rebuilding its existing facilities.
Investments to unlock value
HNGIL holds 47.4% strategic stake in HNG Float Glass which is
engaged in the manufacturing of float glass to meet the needs of
construction and auto sectors. It also holds 14.6 million shares in
HNG & Ace Trust, which at CMP is valued at INR 2.99 billion.
Valuation
We rate a BUY rating on the stock with a price target of INR 268.4
/share, implying an upside potential of 30.9% from current levels in
18 months. Our target price is based on the 50% weightage to DCF
value of INR 258.4/share, 25% equal weightage to each P/E multiple of
12x FY14E EPS of INR 27.1/share and P/Bv multiple of 1.3x FY14E
book value of INR 178.1/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Company Background
Hindusthan National Glass & Industries Ltd. (HNGIL), incorporated in
1946, is a part of the Chandra Kumar Somany Group. The company is
engaged in the manufacturing of container glass bottles that find
application in industries as diverse as liquor, beer, pharmaceuticals,
food, carbonated drinks and cosmetics among others. The company
has six manufacturing facilities in India and one in Germany.
Investment Rationale
Pan India presence with dominant market share
HNGIL is the only player in the container glass industry having Pan
India presence and a market share of ~50%. It generates ~64% of
sales from North & East region where it already has a strong
presence, however South and West contribute to ~32%, thus
providing significant geographical risk diversification.
Cost efficiencies to contain margin erosion
To improve production efficiency, HNGIL has introduced the Narrow
Neck Press and Blow technology which reduces the weight of glass
by 15 to 35% resulting in cost savings. It has also implemented the
usage of gas at four of its plants and intends to use the same for
remaining plants in near future. Going forward, we expect
EBITDA margins to improve by 229 bps ~FY12-14E to 19.2%.
Capacity addition to drive volumes
HNGIL is implementing a greenfield expansion of 650 TPD plant at
Naidupeta, Andhra Pradesh at an investment of INR 8,250 million
which is expected to be operational by July 2012. It is also adding
another 425 TPD through rebuilding its existing facilities.
Investments to unlock value
HNGIL holds 47.4% strategic stake in HNG Float Glass which is
engaged in the manufacturing of float glass to meet the needs of
construction and auto sectors. It also holds 14.6 million shares in
HNG & Ace Trust, which at CMP is valued at INR 2.99 billion.
Valuation
We rate a BUY rating on the stock with a price target of INR 268.4
/share, implying an upside potential of 30.9% from current levels in
18 months. Our target price is based on the 50% weightage to DCF
value of INR 258.4/share, 25% equal weightage to each P/E multiple of
12x FY14E EPS of INR 27.1/share and P/Bv multiple of 1.3x FY14E
book value of INR 178.1/share.
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