Hitachi Home & Life Science Solutions (HHLS) :: 2QFY2012 Result Update -Angel Broking,

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Hitachi Home & Life Science Solutions (HHLS) reported disappointing 2QFY2012
results. The company’s revenue declined marginally by 2.1% yoy to `128cr in
2QFY2012. On the profitability front, the company reported a loss of `7cr
(includes forex loss of `7.8cr) in 2QFY2012 as compared to a profit of `5cr in
2QFY2011. We maintain our FY2013E earnings estimates at `41cr while EBITDA
margins are expected to improve from 7.4% in FY2011 to 7.8% in FY2013E due
to better operating leverage. We maintain our Buy recommendation on the stock.
Below-expectation performance: Net sales declined by 2.1% yoy to `128cr.
EBITDA margin came in at 1.6% in 2QFY2012, down 705bp yoy from 8.7% in
2QFY2011, on the back of higher other expenses and employee expenses.
On the bottom-line front, the company reported a loss of `7cr mainly due to forex
loss of `7.8cr on ECB.
Outlook and valuation: We expect HHLS to post a 15% CAGR growth over
FY2011-13E, aided by a 14.7% CAGR volume growth for the same period due to
increasing per capita income. Copper prices have seen a decline of ~20% in the
past six months, which will lead to increased margins going ahead. PAT is
expected to grow at a CAGR of 17.6% over FY2011-13E to `41cr in FY2013E. At
`165, HHLS is trading at 9.3x FY2013E earnings and P/B of 1.7x for FY2013E.
We maintain our Buy recommendation on the stock with a target price of `212,
based on a target PE of 12x for FY2013E.

Hitachi Home & Life Solutions :: 2QFY2012, Result review: Angel Broking

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Hitachi Home & Life Solutions
Hitachi Home & Life Solutions (HHLS) reported lower-than-expected numbers for
2QFY2012. The company’s revenue declined by 2.1% yoy from `131cr in
2QFY2011 to `128cr (8.3% lower compared to our estimates of `139cr). The
company’s EBITDA margin came in at 1.6%, down 705bp yoy, due to higher
employee and other expenses. The company reported a higher forex loss on ECB
during the quarter, which led to loss of `7cr as compared to profit of `5cr in
2QFY2011.
We expect the company’s sales volume to increase at a CAGR of 14.7% over
FY2011-13E, which would lead profits to increase to `41cr in FY2013E from `29cr
in FY2011. At the CMP of `165, the stock is trading at attractive valuations with PE
of 9.3x FY2013E earnings. We maintain our Buy rating on the stock with a target
price of `212, based on a target PE of 12x for FY2013E.

Hitachi Home and Life Solutions - Bet on comfort: IDBI capital

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HHLS is a major player in the growing Air conditioner market in India with a ~9% market share in the room
AC market. It has a well established distribution network (~1,800 dealers) and a strong brand name.
HHLS has been focusing on the energy efficient Spilt AC’s with many variants which has enabled it to
capture a significant market presence. HHLS has seen a CAGR in Revenue/PAT of 24%/16% during
FY06-11 and as the Indian AC market expected to grow at ~20% (due to low penetration, increasing
income, increasing temperatures) it is poised for a high growth.
Investment Highlights
 A major player in the air conditioners market
HHLS is one of the major players in the Air conditioner market in India and has a strong brand. It has a
~9% market share in room air conditioner (RAC) market. The air condition market in India is estimated to
be ~3.3mn pcs (Rs68,000 mn) and is expected to triple (~10.3 mn pcs) by 2015 (Source: CEAMA).
 Split Air conditioners to drive future growth
The market in RAC is shifting towards split Ac due to lesser noise, more energy efficiency and better
appearance. Split Air conditioners account for ~65% of the total market and is expected to contribute ~80%
by FY14. HHLS has a major presence in the spilt AC segment and is seeing high growth in this segment.
HHLS has an edge over its peers in this category and sold ~79% of its split Ac’s with 5 star rating in FY10.
 Growing temperatures and increasing income to boost future demand
The rising temperatures in the country have increased the demand for air conditioners and now they
are perceived as necessities as compared to luxury earlier. Also, the increasing income of the
masses across the country and easy availability of financing by distributors/retailers has resulted in
the growing demand for air conditioners.
 Low penetration offer high demand prospects
Air conditioner penetration in India is ~3% which is significantly lower than Pakistan (~16%), Malaysia
(~26%) and Brazil (~12%). The penetration in India is expected to significantly improve due to rising
income, increasing affordability of products and higher availability of financing. HHLS to capture the Tier
II and Tier III city customers has launched models which are more affordable in a bid to ensure high
growth.
 Revenue/PAT CAGR of 24%/16% during FY06-11
HHLS had revenue CAGR of 24% during FY06-11 primarily led by volume growth (FY06-11 CAGR
~24%) and PAT CAGR of ~16%. It expanded capacity in FY10 and now can produce ~0.4mn on
single shift basis (total sales in FY11 was ~0.24mn). With expanded capacity and expanding market,
HHLS is well placed to capitalize on the growing market.
 Valuations
HHLS is one of the major players in the air conditioner market in India and is poised for a high growth
phase due to the growing demand and prominent market position it commands. HHLS currently
trades at a PER & EV/EBIDTA of 10.9x and 8x FY11. We have no rating on the stock.

read core thesis and other company covered: click link below

Consumption - A play on the evergreen, resilient theme: IDBI Cap

Hitachi Home 28% Upside ENAM 2011 TOP Pick

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Hitachi Home 28% Upside ENAM 2011 TOP Pick 



Direct play on Indian consumption
● Hitachi Home (India) is a prominent player in the premium air conditioning segment. The company has
two plants in Jammu and Kadi with a total capacity of 4 lakh units.