HSIL Ltd. | Event Update | HSIL Ltd enters into water heaters business | Maintain BUY rating on the stock with SOTP based target price of Rs 485 :: IndiaNivesh, report

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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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BUY HSIL::: IndiaNivesh, Jan 2014 picks

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Growth trajectory to continue; profitability improvement visible; Upgrade stock to BUY :: IndiaNivesh

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HSIL Ltd.|Q2FY15 Result/Concall Update | Mixed performance; Packaging products shines but building products spoil the show; Maintain HOLD rating with revised target price of Rs 380-:: IndiaNivesh

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HSIL Ltd.|Q2FY15 First Cut Analysis | Mixed performance; Packaging products shines but building products spoil the show | We maintain HOLD rating on the stock with target price of Rs 425 :: IndiaNivesh

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HSIL Ltd: Price target achieved; Maintain target price of Rs 425 and revise rating to HOLD :: Indianivesh

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We had recommended HSIL Ltd in portfolio at Rs 140 with target price of Rs 180.
Thereafter, we initiated coverage on HSIL Ltd at price of Rs 215 on 23rd May 2014,
with BUY rating and target price of Rs 278 per share. On outperformance in FY14
results, we upgraded our target price to Rs 330 per share. Our target of Rs 330 per
share was achieved on 2nd September 2014 which was further revised to Rs 425. On
10th October 2014 target price of Rs 425 was also achieved. Our key investment
rationale for recommending HSIL were: 1) Thrust on premiumisation in building
products 2) packaging products segment expected to return to black 3) focus on
better sanitation levels due to increasing disposable household income and rapid
urbanisation and 4) improving financial performance. In our opinion, these levers
are still in place. Due to increasing focus of government and corporates on better
sanitation levels in the country, the growth visibility has improved. Even on packaging
products segment, the losses are reducing.
At CMP of Rs 402, the stock trades at 24.5x and 15.8x its FY15E and FY16E earnings
of Rs 16.4 and Rs 25.5 per share respectively. Despite the sharp run-up in share
price post Q1FY15 results, the valuation appears attractive. Its key competitor Cera
Sanitaryware Ltd trades at PE of 25.2x its FY16E Bloomberg consensus earnings
estimate. However, we would wait till Q2FY15E results to revise our target price.
Currently we maintain our SOTP based target price of Rs 425 and revise the rating
to HOLD.



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CERA Sanitaryware Ltd – Stellar set of Q2FY15 results | Rub‐off impact on HSIL :: IndiaNivesh

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CERA Sanitaryware Ltd – Stellar set of Q2FY15 results | Rub‐off impact on HSIL
Cera Sanitaryware Ltd reported strong set of Q2FY15 results. Net sales of the company stood at Rs 1996
mn against Rs 1588 mn in Q2FY14, implying a growth of 25.7% yoy. EBITDA grew 43.5% yoy to reach Rs 276
mn in Q2FY15 from Rs 193 mn in Q2FY14. EBITDA margin expanded 172 bps yoy to reach 13.8% in Q2FY5
from 12.1% in Q2FY14. This was primarily due to lower raw material (47.2% in Q2FY15 vs. 48.4% in
Q2FY14) and power cost (3.7% in Q2FY15 vs 4.8% in Q2FY14). Net profit grew 48.3% yoy to reach Rs 157.5
mn in Q2FY15 from Rs 106 mn in Q2FY14. Lower than proportionate growth in interest and depreciation
costs (5.3% and 11.3% yoy respectively) against EBITDA growth led to net margin expansion of 120 bps yoy.
Net margin expansion was lower than EBITDA margin expansion due to 10.7% decline in other income.
Consequently, net profit margin expanded to 7.9% in Q2FY15 against 6.7% in Q2FY14. EPS of the company
stood at Rs 12.4 in Q2FY15 against Rs 8.34 in Q2FY14.
Our take and Valuation
At CMP of Rs 1706, the stock trades at PE of 31.9x and 26.8x its FY15E and FY16E Bloomberg consensus
earnings of Rs 53.57 and Rs 63.59 per share. The company beat the street estimates on profit front. In our
opinion, this is on account of savings in power and raw material costs. The company is in the process of
setting up wind and solar power to lower power costs. Lower material cost could be attributed to focus on
value added products. We do not have any formal rating on the stock.
Rub‐off impact on HSIL
However, we expect the same trend to be visible in HSIL – building product segment. HSIL has also been
focussing on value added products and lowering its power costs by usage of alternate fuels. It has been
improving its EBITDA margin of building products which stood at 22.8% in FY14 against 20.5% in FY13. At
CMP of Rs 373, HSIL trades at PE of 22.8x and 14.6x FY15E and FY16E earnings of Rs 16.4 and Rs 14.6 per
share. We maintain our positive stance on HSIL with a BUY rating and SOTP based target price of Rs 425.  



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Five stocks that you can buy now despite current global crisis ::ET

It's no longer news. India Inc is facing a crisis, grappling as it is both the domestic and global issues. Even as it weathers the international macro headwinds, such as the Eurozone sovereign debt crisis and impending recession in the US, the situation at home is worsening. Despite the country's GDP growth rate plunging to a 9-year low, the government is stuck with policy paralysis and refuses to take urgent remedial measures.

Meanwhile, the weakening rupee is not only damaging the sentiment, but also causing inflation and, therefore, the RBI has not cut interest rates as fast as expected by the business community.

To make matters worse, it seems the Indian economy is set to endure a bad monsoon too this year. With the consumer price inflation already in double digits, a bad monsoon is the last thing it can afford.

Given the confluence of problems, it is inevitable that these are reflected in corporate profits. As is evident from the chart, the consensus Sensex EPS estimate for financial year 2012-13 is coming down continuously.

With 2011-12 behind us and brokerages' focus shifting to the EPS estimates of 2012-13, the fall in its value is also accelerating. The current value of Rs 1,274 is significantly lower than Rs 1,300 three months ago, and Rs 1,500 two years ago.

HSIL; Target – Rs 240/280 ::Way2Wealth :: Diwali Picks 2011

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History and Business Model
HSIL Limited was established in 1960. This was the first Company in India to
manufacture Vitreous China Sanitaryware. HSIL is the market leader of India’s
sanitaryware industry with a significant market share of over 40% of the organised
market. The Hindware brand markets bathroom ceramics, faucets & bath
accessories and is available across the length and breadth of the country
supported by over 1,550 direct dealers and 14,000 sub dealers which is the largest
in the country. Hindware has expanded its product portfolio to include ceramic tiles
recently. HSIL is also the market leader in container glass in South India and
enjoys 70% market share in that geography and the second largest market player
nationally. This division’s caters to soft drink, alcoholic beverages, food processing,
chemical and pharmaceuticals sectors. The company has five manufacturing
facilities in India across Andhra Pradesh (3), Haryana (1) & Rajasthan (1).
Financials
Revenues and profits have grown at a robust rate of 22.6% and 28.7% over FY07-
11 period. The margins have expanded significantly from 14.2% in FY07 to 18% in
FY11. We expect the margins to expand further to ~21% with entry into high value
sanitary and specialty bottles segment. We also expect the RoCE and RoNW to
improve from the current levels.
Growth Drivers
• Strong brand equity: Demand in the Indian sanitary industry is expected to
grow at 15-16% and HSIL is expected to record faster growth. Its strong brand
recall and introduction of new products have continuously helped HSIL to
sustain its leadership position and increase revenue.
• Capex to drive growth: To meet growing demand across divisions, HSIL is
planning to invest Rs 650 crores over FY2011-14E to expand capacities in
Sanitaryware (Rs 200 crore), faucets (Rs 100 crore) and container glass
division (Rs 350 crore). HSIL has successfully raised Rs 150 crore via QIP in
October 2010. Sanitaryware capacity will increase to five million pieces p.a
from the current 2.8 million and the container glass division will increase
capacity to 2.5 billion pieces from 1.8 billion pieces p.a.
• Robust industry scenario: HSIL’s Sanitaryware business would benefit from
growth in the housing sector while growing disposable income in India will
boost demand in industries such as alcohol, beverages, pharma and food
packaging, which will benefit the container glass segment.
• Realisation to improve: It’s expanding product range and reach coupled with
capacity expansion is expected to boost volume growth. Realisation will
improve significantly from changing product mix towards premium range.
• Synergistic acquisition of Garden Polymers: HSIL acquired 100% stake in
Garden polymers (engaged in manufacturing of PET bottles). It has synergies
with HSIL’s Container glass division, which has the same set of customers.
HSIL will be able to offer a wider range of packaging solutions to these
customers post acquisition and aims to grow this subsidiary by over 40%
every year for the next 4-5 years. Garden Polymers’ capacity will be expanded
beyond PET to be able to manufacture PE, PP, HDPE and packaging.
Valuations:
Going forward, the management expects a growth of 30% for building products and
30-32% for glass containers in FY12. The growth will be driven by newer capacity
coming on stream, rise in the share of higher realisation products, increase in
market share, and better product mix. At the CMP of Rs 184, the stock quotes at
P/E of 10x its FY12E earnings and P/BV of 1.8x which is low for a player with
strong brand and leadership position.
Technicals
HSIL is in a secular bull run since 2008 when it has made a low of Rs 20. Very
recently in August it has touched to its life time high of Rs 240. Such a secular run
has not shown any weakness in chart and one can look for any dips in buying this
scrip. Taking help of Fibonacci, around 38% levels of entire move comes at Rs
160, which would be an acceptable entry point for this scrip. We expect this scrip to
continue to post higher highs later.

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Way2Wealth :: Diwali Picks 2011

HSIL Target price achieved; downgrade to Sell :: Anand Rathi

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HSIL
Target price achieved; downgrade to Sell
 2QFY11 Results. HSIL’s profit marginally belied our estimates,
mainly due to lower-than-expected performance by container glass
division. We have factored in the earnings dilution from the recent
QIP issue of `1.5bn (net of interest savings). We believe the stock
is fairly valued at current levels and does not offer any near-term
re-rating triggers. Downgrade to Sell.
 Sanitaryware segment. The sanitaryware division’s revenue grew
44% yoy on the back of a better product mix and higher
realizations. The division recorded an EBIT margin of 19.9% in
2QFY11 (down 15bp yoy and up 110bp qoq). The company plans
to increase capacity of its AP/Haryana facility by 0.7/0.3m pieces.
 Container glass division. The division expanded the Hyderabad
unit capacity by 50 tons per day for which it had to shut one of
the furnaces for nine weeks. This led to its subdued performance.
Revenue was up 14% yoy, though down 14% qoq. The 2QFY11
EBIT margin stood at 12.3%, up 200bp qoq and down 90bp yoy.
 QIP issue and change in estimates. HSIL raised `1.5bn in
equity through a QIP (`136 a share) in 2QFY11. We lower our
EPS estimates by 1%/4% for FY11/12 to factor in a 20% equity
dilution, the benefit of interest savings from the QIP proceeds
and lower tax rate.
 Valuations. We retain our target multiple at 11x one-year-forward
earnings, in line with the stock’s five-year average. Our revised
target price stands at `134 (earlier `140). Downgrade to Sell.

HSIL- Target price achieved; downgrade to Sell :: Anand Rathi

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HSIL- Target price achieved; downgrade to Sell 

n       2QFY11 Results. HSIL’s profit marginally belied our estimates, mainly due to lower-than-expected performance by container glass division. We have factored in the earnings dilution from the recent QIP issue of Rs1.5bn (net of interest savings). We believe the stock is fairly valued at current levels and does not offer any near-term re-rating triggers. Downgrade to Sell.

n       Sanitaryware segment. The sanitaryware division’s revenue grew 44% yoy on the back of a better product mix and higher realizations. The division recorded an EBIT margin of 19.9% in 2QFY11 (down 15bp yoy and up 110bp qoq). The company plans to increase capacity of its AP/Haryana facility by 0.7/0.3m pieces.

n       Container glass division. The division expanded the Hyderabad unit capacity by 50 tons per day for which it had to shut one of the furnaces for nine weeks. This led to its subdued performance. Revenue was up 14% yoy, though down 14% qoq. The 2QFY11 EBIT margin stood at 12.3%, up 200bp qoq and down 90bp yoy.

n       QIP issue and change in estimates. HSIL raised Rs1.5bn in equity through a QIP (Rs136 a share) in 2QFY11. We lower our EPS estimates by 1%/4% for FY11/12 to factor in a 20% equity dilution, the benefit of interest savings from the QIP proceeds and lower tax rate.

n       Valuations. We retain our target multiple at 11x one-year-forward earnings, in line with the stock’s five-year average. Our revised target price stands at Rs134 (earlier Rs140). Downgrade to Sell.