HIL Ltd.|Q2FY15 Result Update | Beats bottomline performance expectations; Upgrade target price to Rs 898 and maintain BUY rating :: IndiaNivesh

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 HIL Ltd reported Q2FY15 results that were better than expectations.Net Sales
were in-line with estimates at Rs 2278 mn against our expectations of Rs
2197 mn, higher by 3.7%. On yoy basis, net sales grew by 40.8% from Rs 1618
mn in Q2FY14. The sales growth was driven by building products segment
(contributing 96.8% to revenues) which grew by 269% yoy at Rs 2215 mn in
Q2FY15 against Rs 1557 mn in Q2FY14. EBITDA was in-line with our
expectations at Rs 167 mn against Rs 170 mn expected. EBITDA margin missed
our expectation of 7.7% with reported EBITDA margin at 7.3%. This might be
on account of lower profitability in the thermal insulation segment. The
thermal insulation segment reported EBIT margin of 1.4% in Q2FY15 against
9.2% in Q2FY14. Building product segment reported EBIT margin of 7.7% in
Q2FY15 against loss of 1.2% in Q2FY14. PAT stood at Rs 143 mn in Q2FY15
against our expectation of Rs 63 mn. This is on account of one-time exceptional
gain of Rs 71.9 mn on sale of assets, higher other income, lower interest cost
and lower effective tax rate. Other income was higher by 61% yoy at Rs 22
mn against Rs 14 mn in Q2FY14. Effective tax rate was lower at 15.4% in
Q2FY15 against 32.9% in Q1FY15 and 54% in Q2FY14. Adjusting for one time
income (sale of assets) and expenses (Voluntary Early Retirement Scheme),
adj. PAT stood at Rs 80 mn against expectation of Rs 63 mn, higher by 25.3%.
 On Half yearly performance, net sales grew by 36.1% yoy to reach Rs 5884
mn in H1FY15 from Rs 4323 mn in H1FY14. Building products segment grew
42.2% yoy to reach Rs 5757 mn in H1FY15 against Rs 4191 mn in H1FY14.
Thermal insulation segment was flat at Rs 56 mn in H1FY15 against Rs 57 mn
in H1FY14. EBITDA grew 192.6% yoy to reach Rs 694 mn in H1FY15 against Rs
237 mn in H1FY14. EBITDA margin stood at Rs 11.8% in H1FY15 against 5.5%
in H1FY14, an improvement of 631 bps yoy. The improvement in EBITDA
margin is on account of better sales performance and lower raw material and
staff cost. Raw material cost as percentage to sales reduced to 57% in H1FY15
against 61.3% in H1FY14. Staff cost reduced to 8.7% in H1FY15 from 10.4% in
H1FY14. On segmental profitability front, building products reported EBIT
margin of 11.9% in H1FY15 against 7% in H1FY14. Thermal insulation segment
reported pressure on profitability at 8.9% in H1FY15 against 9.9% in H1FY14.
Adjusted PAT (adjusted for exceptional expenses and one-time income) stood
at Rs 408 mn in H1FY15 against Rs 76 mn in H1FY14, growth of 437.2%. This is
on account of higher other income and other operating income and reduced
interest cost. Interest cost reduced to Rs 20 mn in H1FY15 against Rs 63 mn in
H1FY14.
 During the quarter, the company has commissioned a 2MW Wind Turbine
taking the total installed capacity of wind power to 9.35 MW.

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