HSIL Ltd.|Q3FY15 | Q3FY15 Results Outperform; Packaging Products shine; maintain BUY rating on the stock with target price of Rs 485:: IndiaNivesh

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HSIL Ltd reported Q3FY15 results that outperformed our estimates as well as street
estimates. The company reported topline growth of 26.1% yoy with bottomline
growth of 156.9% yoy. This strong bottomline growth is on account of low base in
Q3FY14 where the company had reported losses in packaging products segment.
Packaging products performance surprised positively while building products
segment performance surprised negatively in Q3FY15.
HSIL reported 26.1% growth in net sales at Rs 4555 mn against our expectation of
Rs 4238 mn, outperforming our estimates by 7.5%. This outperformance was mainly
on account of packaging products segment. Packaging Products segment surprised
us positively as it reported 52.7% yoy sales growth in Q3FY15. The revenue of the
segment reached Rs 2339 mn in Q3FY15 from Rs 1531 in Q3FY14. Building products
segment surprised us negatively with a meagre growth rate of 7% yoy. However, in
our opinion, lower growth could be due to delay in sales to distributors as there
was inventory built-up with them. Also, the company had discontinued with tiles
business, which could have impacted the segment growth. We would seek
clarification from the management on lower growth in building products and its
likely future performance. The net sales of building products segment reached
Rs 2281.9 mn in Q3FY15 from Rs 2133 mn in Q3FY14.
The company reported 57.8% yoy growth in EBITDA at Rs 877 mn against our
expectation of Rs 737 mn. EBITDA margin stood at 19.3% in Q3FY15 against 15.4%
in Q3FY14 (INSPL est: 17.4%), an improvement of 388 bps yoy. This is on account of
lower power cost and other expenses which were partially offset by higher raw
material cost. EBIT margin in building product segment contracted 190 bps yoy to
reach 18.5% against 20% in Q3FY14 and 18.5% in Q2FY15 (INSPL est: 20%). However
for packaging products, EBIT margin reported at 13.4% in Q3FY15 against 1.1% in
Q3FY14 and 7% in Q2FY15 (INSPL est: 7%).
PAT reported at Rs 303 mn against our expectation of Rs 199 mn. PAT of the company
stood at Rs 303 mn against Rs 118 mn in Q3FY14, signifying growth of 156.9% yoy.
This is far above our estimate of Rs 199 mn, outperforming by 52.5%. In our opinion,
this can be attributed to outperformance in packaging products segment both on
topline and profitability fronts.
In 9mFY15, HSIL reported 16.4% sales growth to reach Rs 12798 mn from Rs 10995
mn in 9mFY14. This was driven by 6.1% yoy growth in building products and 28.3%
yoy growth in packaging products segment. EBITDA grew 51.3% yoy to reach
Rs 2172 mn in 9mFY15 against Rs 1436 mn in 9mFY14. This is on account of
decline in power and fuel cost and other expenses which was partially offset by
increase in raw material cost. Building products segment reported EBIT margin of
19.3% in 9mFY15 against 19.8% in 9mFY14. Packing products segment reported
profit of 7.7% in 9mFY15 against loss of 1.7% in 9mFY14. PAT stood at Rs 644 mn in
9mFY15 against Rs 268 mn in 9mFY14, growing by 139.8% yoy. This strong growth
was aided by lower growth in interest cost and lower effective tax rate.

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