Himadri reports weak operating performance in Q2FY11:: Emkay

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Himadri reports weak operating performance in Q2FY11 - APAT growth at 2.5% yoy to Rs0.3 bn

n    Himadri reported weak performance in Q2FY11 - revenue growth at 51% yoy to Rs1.8 bn, Ebidta growth at 2.7% yoy to Rs0.5 bn and APAT growth at 2.5% yoy to Rs0.3 bn.

n    Sharp reduction in Ebidta margins was witnessed in Q2FY11 - led by (1) yoy base effect in material costs, lower priced material in Q2FY10 (2) dependence on grid power, owing to shutdown of waste heat power plant and (3) lower sales of Napthalene, owing to capacity rebalancing

n    Company would draw power from grid until January 2011, thereby earning lower Ebidta per ton

n    Himadri commenced production in 80,000 MTPA coal-tar distillation capacity in Q2FY11- the capacity has already achived 95% utilization in November 2010

n    Expansion plans remains unchanged, so does the commitment levels. Himadri is moving ahead with (1) greenfield CTP capacity in India - 150,000 MTPA (2) carbon black expansion from 50,000 MTPA to 100,000 MTPA (3) SNF expansion from 18,000 MTPA to 78,000 MTPA and (4) 12 MW waste heat power plant.

n    Further, Himadri sounds reasonably confident on the China expansion of 100,000 MTPA, though not factored in our earnings estimates.

n    Our earnings estimates for FY11E and FY12E are Rs33.3/Share and Rs45.2/Share. Himadri fully discounts its FY12E earnings at 14X, leaving no scope for negative surprise.