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Building products sector has been in focus in Q2FY15, after the government enforced
its thrust on improving the sanitation levels across the country. It intends to cover
every household by total sanitation by 2019. The launch of Swachh Bharat Mission
marks another step in the same direction. All these measures are likely to improve
the demand for building products sector which includes sanitaryware, tiles and
plumbing products, among others.
We expect our Building Products universe to report net sales growth of 16.9% yoy.
This is largely driven by growth in sanitaryware products and asbestos products.
EBITDA is likely to grow by 51.6% yoy with margin expansion of 306 bps yoy. This is
on account of turnaround in packaging products segment of HSIL Ltd and overall
turnaround of HIL Ltd. Superior margin of 21% expected in building product segment
of HSIL is also likely to aide the margin performance. EBITDA performance is likely
to percolate to the bottomline as there is no major capex in either of the companies.
Hence, PAT is likely to grow by 117% yoy with margin expansion of 694 bps yoy
arising from economies of scale and operating leverage.
Outlook
We are positive on growth prospects of the sector due to following reasons: 1.
Government thrust on improving sanitation, 2. Favourable demographic profile of
the country, 3. 15% CAGR of the sector with organised sector growing at a faster
pace of more than 20%, and 4. Capex light strategy of tile companies. HSIL and HIL
are our top picks in the sector. We like HSIL due to its leadership position in
sanitaryware products segment, improving profitability of packaging products
segment and attractive valuations. We prefer HIL Ltd due to improving scenario of
asbestos products, diversification into non-asbestos (green building) products to
reduce dependence on imported chrysotile, expected improvement in financial
performance and attractive valuations.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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Building products sector has been in focus in Q2FY15, after the government enforced
its thrust on improving the sanitation levels across the country. It intends to cover
every household by total sanitation by 2019. The launch of Swachh Bharat Mission
marks another step in the same direction. All these measures are likely to improve
the demand for building products sector which includes sanitaryware, tiles and
plumbing products, among others.
We expect our Building Products universe to report net sales growth of 16.9% yoy.
This is largely driven by growth in sanitaryware products and asbestos products.
EBITDA is likely to grow by 51.6% yoy with margin expansion of 306 bps yoy. This is
on account of turnaround in packaging products segment of HSIL Ltd and overall
turnaround of HIL Ltd. Superior margin of 21% expected in building product segment
of HSIL is also likely to aide the margin performance. EBITDA performance is likely
to percolate to the bottomline as there is no major capex in either of the companies.
Hence, PAT is likely to grow by 117% yoy with margin expansion of 694 bps yoy
arising from economies of scale and operating leverage.
Outlook
We are positive on growth prospects of the sector due to following reasons: 1.
Government thrust on improving sanitation, 2. Favourable demographic profile of
the country, 3. 15% CAGR of the sector with organised sector growing at a faster
pace of more than 20%, and 4. Capex light strategy of tile companies. HSIL and HIL
are our top picks in the sector. We like HSIL due to its leadership position in
sanitaryware products segment, improving profitability of packaging products
segment and attractive valuations. We prefer HIL Ltd due to improving scenario of
asbestos products, diversification into non-asbestos (green building) products to
reduce dependence on imported chrysotile, expected improvement in financial
performance and attractive valuations.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
LINK
http://www.indianivesh.in/Admin/Upload/635484414615072500_Nivesh_Q2FY15%20Results%20Preview_Building%20Products.pdf
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