HIL CD 230910

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23rd September, 20

Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insura

COMPANY REPORT HYDERABAD INDUSTRIES LTD.

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Hyderabad Industries Ltd. (HIL)

No. of Shares (Crore) 0.75

Face Value ` 10.00Mkt. Cap (`. Crore) 466.09

Price (22/09/2010) 623.95

Book Value (`.) 380.74

P/BV 1.64

BSE Code 509675

NSE Code HYDRBADIND

Bloomberg HYI IN

Reuters HYDI.BO

Volume (weekly) (NSE) 159516

52 W H/L (`.) 761.80 / 349.80

Shareholding pattern %Promoters 43.10

MFs / Banks / FIs 2.89

Foreign 5.63

Govt. Holding 4.10

Non-Promoter Corp. 11.04

Total Public 33.24

Total 100.00

(As on 30th June, 10)

Recommendation

BUYSection1.01

Analyst

ROHIT AGARWALPhone: +91-33-22805601/02

E-Mail: [email protected]

Financials FY08 FY09 FY10 FY11E FY12E

Net Sales 480.96 618.85 703.69 830.14 999.35

Other Income 5.57 4.20 6.75 7.50 8.30

PBIDT 40.80 92.83 157.54 179.76 206.32

Net Profit 13.67 44.84 89.75 98.64 113.00

EPS 18.25 59.87 119.83 131.69 150.87

EPS Growth (%) (15.72) 228.02 100.16 9.90 14.56

P/E (x) 7.98 2.01 4.89 4.74 4.14

P/BV (x) 0.74 0.48 1.67 1.32 1.00

(i)

Company Brief

HyderabadIndustriesLtd. (HIL) isoneof the leadingmanufacturers

FibreCementSheetsinIndiawithamarketshareofabout20.5%.Itsk

productrangeincludeFibreCementRoofingSheetssoldunderthebranname CHARMINAR, AAC Blocks and Panels called AEROCON, an

CalciumSilicateInsulationProduct(thermalinsulation)calledHYSIL.

Highlights

HILhasanextensivepresenceacrossthecountryandenjoyspremiubrand equity in themarketbased on superior quality, strength an

durability.

The company has diversified into value added (environmenfriendly green) products,whichwillderisk itsbusinessmodel an

diversifyits

revenue

stream.

Given

the

diversification

into

valu

addedproducts,we stronglybelieve thatHIL isdue toget rerate

andcommandmuchhighermultipleintimestocome.

Demand of such green building products is increasing across thworldonaccountofseriousconcernsabouttheenvironmentandth

impactonenergyconsumption.

HIL is increasingthecementsheetcapacityby180000tpato10795tpa& thermal insulationby3000 tpa to11500 tpa inCY11.Thisw

help the company to keep pace with the growing demand for i

productsandretainsignificantshareinthemarket.

Relatively

speaking,

HIL

has

far

superior

earnings

profile

and

retu

ratiosincomparisontoitspeers.Ithasastrongerbalancesheetwith

Debt:EquityRatioof0.3,ROCEof~44%.Thecompanyhasthehighe

operatingmarginsincomparisontoitspeers.

Atthecurrentpriceof`624,thestocktradesataP/Emultipleof4.1FY12E earnings and P/BV multiple 1.0 x FY12E earnings. W

recommend a BUY on the stock with a price target of ` 75assumingaP/Emultipleof5xFY12Eearnings,anupsideof21%fro

thecurrentlevels,overaperiodof12months.` in Crore

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Company Background

Hyderabad Industries Limited (HIL), incorporated on 17 June 1946, is a flagship company of t

C.K.Birlagroupofcompanies.ThecompanyisoneoftheleadingmanufacturersofFibreCementSheeinIndiawithamarketshareofabout20.5%.HILmarketsitsproductfibrecementsheetsunderthewe

knownbrandCharminar.

Over the years HIL has evolv

from a roof manufacturin

companytoamultiproduct,gre

building products organizatio

manufacturingbuilding produc

engineering goods and industr

products.

HIL is the largestmanufacturer of calcium silicate, insulationblocks, pipe sections andjointing f

gasketing,therebymeetingthecriticalneedsofthefertilizer,engineeringandchemicalindustries.Ital

manufacturesaeroconprefabpanels,autoclavedaeratedconcrete(AAC)blockswhichfindapplicatio

intheconstructionofresidentialquarters,malls,shoppingcomplexesandofficepartitioningetc.

HIL has an extensive presence across the country with

manufacturingfacilities,52salesdepotsandmorethan5,000sal

points,therebyprovidingextensiveproductreach.

More than 85% of the total turnover is derived from Fib

Cement Roofing Sheets followed by Thermal Insulatio

Products,AACBlocksandaeroconpanels.Intermsofoperatinmargins, the aerocon panels have the highest margins (30

plus), followed by thermal insulation products (~30%), AA

blocks(~20%)andthenbuildingproducts(13%16%range).

Product Segment

Fibre Cement Roofing Sheets

HIL

is

one

of

the

leading

manufacturers

of

Fibre

Cement

Sheets

in

India

with

an

estimated

markshareofabout20%.Thecompanymarketsitsproductfibrecementsheetsunderthewellknownbran

Charminar,whichcommandsabandpremiumofbetween24%.

Thecompanyderivesmorethan80%ofitstotalturnoverfromthisproductsegment.80%ofthesal

comefromruralmarkets(makingitalsoaruralplay)withthebalance20%comingfromtheindustr

andothersegments(warehouses,poultry,urbanslumsetc).

Toretainitsleadershipposition,theCompanyhasbeenincreasingitsmanufacturingcapacityandisal

furtherstrengtheningitsmarketinganddistributionnetwork.

evenue MixAAC

Blocks

4%

Aerocon

Panels

3%

Thermal

nsulation

5%

Fibre

Sheets

88%

urce: Company, CD Research

Business Segment

Segment Product Brand Name

Fibre Cement Roofing Sheets Charminar, MalabarBuilding Products Division

AAC Blocks & Aerocon Panels Aerocon

Thermal Insulation Products Calcium Silicate Insulation Product Hysil

ource: Company, CD Research

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Thermal Insulation Products (Green Product)

HILismarketleaderinthisproductsegmentwithamarketshareof76%inIndia.ThisgroupofCalciu

Silicate

based

insulating

materials

services

industries

such

as

cement,

power,

petrochemical,

fertilizer

eHILsCalciumSilicate insulationproduct,HYSIL, ismade fromHydratedCalciumSilicate,reinforce

withnonasbestosfibres.Duetotheirsuperiorpropertiesandhighquality,thecompanysproductsha

goodacceptanceoveritssubstitutes.

Thisproductcontributesabout4.4% to revenueand isahighmarginproduct incomparison to th

buildingproductsdivisionwithPBITmarginsintherangeof30%.Inviewoftheincreasingdeman

HILhas increased theproduction capacityby2,500 tpa taking the totalcapacity to8,500 tpa inAp

2010.Itisfurthercontemplatingputtingupanother3,000tpaplantinFY11foraCapexofabout`25

crore.

Aerocon Panels (Green product)

HILisonethelargestplayersinthissegmentwithamarketshareofaround60%andhasdeveloped

patentedprocesstomanufacturethesame.Thecompanymanufacturesvariousboardsandpanelsth

find application in housing, partitioning, interiors etc. Charminar Aerocon panels are an excelle

substitute for plasterboard, plywood, particleboard and brickwalls because of their sheer streng

coupledwithfireandmoistureresistancepropertiesandeaseofinstallation.

Whilecurrentlythissegmentcontributesonlyaround3%tothetotalrevenues,HILisexcitedabo

theprospectsoftheuseofpanelsinthelowcosthousingmarket.

Autoclaved Aerated Concrete Blocks (AAC) (Green Product)

AAC blocks are lightweight, building material that provides structure, insulation, fire and mo

resistance in a single material. Charminar Aerocon Autoclaved Aerated Blocks are an excelle

alternativetotraditionalclaybricksforconstructionofwallsforbuildings.

Thissegmentcontributesaround4%toHILstopline.ThecompanyhasrecentlyaugmenteditsAA

blockmanufacturingcapacityfrom1lakhCuMto3.2lakhCuMbysettingupaGreenfieldplantof2

lakhCuMatGujarat.HILcommands40%ofmarketshareintheSouthandwiththecommenceme

ofGujaratunit,thecompanywillcatertothegrowingdemandforAACBlocksinthewesternpart

thecountry.

Highlights FY10

Particulars Fibre Cement Sheets Thermal Insulation AAC Blocks Aerocon Pan

Capacity 854500 MT 6000 MT 100000 CuM 460000 MT

Production 771639 MT 5353 MT 79660 CuM 21788 MT

CaUT 90.3% 89.2% 79.7% 4.7%

Sales Qty 729767 MT 5332 MT 74882 CuM 21580 MT

Sales (` Cr) 609.3 33.3 29.3 22.0Realisations (`) 8349.1 per MT 62359.3 per MT 3906.2 per CuM 10171.5 per M

Source: Company, CD Research

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Industry Outlook

Growth forCementproduct industrydepends onReal estate and construction and infrastructurelated

activity.

With

the

initiatives

made

by

the

government

in

various

infrastructure

projects,

roa

networks and housing facilities, coupled with the housing sector boom and urban and rur

development,highgrowthinthecementproductindustryisexpectedinforthcomingyears.

There is a strong correlationbetween thedemand for roofing andGDPgrowth.Thedemand froofinggrowsatabout1.31.5xGDPgrowth.Hence,with the Indianeconomy expected to repo

GDPgrowthupwardsof8%inFY11aspertheRBIsestimates,demandforroofingisexpected

growinthe10.512%range.

TheFibreCementSheetbusinessispoisedforgrowthovernextfewyearsonaccountofanticipatmigrationfromthatchedandtiledroofingtomorerefinedroofing.FibreCementSheetsaregainin

popularityas

they

are

better

insulator

of

heat,

less

expensive,

safer,

need

no

maintenance

and

la

longerwhencomparedtocompetingroofingmaterial.

The implementationof theUINProgramme isexpected to furtherboost income for theruralpothereby increasing the potential market for usage of fibre cement sheets in rural areas. T

Government of India,with an aim toprovide adequate shelter to the ruralpoorhas introduc

programmes likeIndira AwasYojna(63%higherallocationinFY11comparedto last year),Gold

Jubilee RuralHousingFinanceScheme,PradhanMantri Adarsh GramYojana,ProductiveHousin

inRuralAreaandRuralHousingFundwhich is apositivedevelopment for the industries in t

roofingsector.

The

demand

for

Green

Building

Products

is

increasing

the

world

over

on

account

of

serious

concer

abouttheenvironmentandtheimpactonenergyconsumption.

Demand for insulationproductswillcontinue toremainrobustdue to fresh investments forgrefield projects as well as replacement and modernization of plants in the cement, fertilize

petrochemical and other industries.All the user industries have huge industrial capex lined u

duringnext23years.AccordingtoCrisil,IndiastotalindustrialcapexovertheFY09FY12perio

willgrowatCAGRof7%.

ThemarketforAACBlocksisdirectlydependentontheconstructionofmultistoryapartmentsancommercialbuildingsinparticular.Withtherecoveryinrealestatesectorweexpectthedemand

start

growing

henceforth.

LatelyAACblocksaregainingpopularitycomparedtoconventionalclaybricks.Comparedtoclbricks,AACblocks are onethird lighter.Moreover usage ofAACblocks reduces ambience he

insidethebuildinginagreatmanner.Constructionisalsomuchfaster.TheannualdemandforAA

blocks isestimatedataround34%of totalclaybrickdemandand it is fastgainingpopulari

among big builders.Hyderabad Industries being the only listed player is expected to bene

immensely.

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Investment Arguments

Diversified business model

From amere roofmanufacturing company, HIL has evolved into amulti product, greenbuildin

productsorganization.Thecompanyhasgraduallydiversifiedfromaoneproductcompany intooth

areas such as Autoclaved Aerated Concrete (AAC) blocks, thermal insulation products and oth

productslikePrefabricatedbuildingpanels,Hysilpowder,Sparesandaccessoriesetc.

With the Green Building concept gainin

importance and growing acceptability f

cement boards and panels as a substitute f

plywood,HILs strategy todiversify into alli

products like cementblocks,boards,panels e

shouldgainacceptanceandmarketsharegoinahead.

ThiswillhelpHILderiskitsbusinessmodelan

diversify its revenue stream. Moreover the

value added (green) products commandmu

higher EBIT margins as compared to ceme

sheets (commoditizedproduct), therebyhelpin

inimprovingoverallmarginsofthecompany.

Robust capacity expansion plans

HILhasbeenconstantlyexploringtheoptionofenhancingthecapacityatitsexistinglocationandalso

setupnewplantsinnewstrategiclocationstokeeppacewiththegrowingdemandforitsproductsan

retainsignificantshareinthemarket.

It has recently augmented its ceme

sheet manufacturing capacity b

90,000MT taking it to 8.5 lakh tonn

Moreover, ithasalsoenhanced itsAA

blockcapacityby220% to320,000Cu

and its thermal insulation productsb

2,500tonnetakingitto8,500tonneby1April2010.

HILhasrecentlyacquiredaFibrecementsheetsmanufacturingfacilitysituatedatPunjabwithacapaci

of45,000MT/Annum.ThisunitshallcatertotheneedsofthegrowingFibrecementsheetsmarketint

stateofPunjabanditsadjacentstatesandfacilitatethecompanytoincreaseitsmarketshare.Itisfurth

expanding its cement sheet capacityby setting up a 90,000 tpa plant at Bihar at cost of` 40 cror

expectedtobeoperationalbyMar2011andincreasingcapacityatexistingUPplantby90,000tpaatco

of`30crore;expectedtobeoperationalby4QFY11.

Capacity Expansion - Snapshot

Segment FY09 FY10 Current FY11E FY12E

Fibre Sheets (MT) 764500 854500 899500 989500 1079500

Thermal Insulation (MT) 6000 6000 8500 11500 11500

AAC Blocks (CuM) 100000 100000 320000 320000 320000

Aerocon Panels (MT) 460000 460000 460000 460000 460000ource: Company, CD Research

urce: CD Research

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HILisalsocontemplatingputtingupanother3,000tpathermalinsulationplantinFY11foraCapex

about`2530crore.Thecompanyplanstofundmostofthesecapexthroughinternalaccruals.

The

company

is

expected

to

immensely

benefit

on

the

back

of

increasing

demand

for

its

produsegments.DemandforcementsheetisexpectedtogrowataCAGRofmorethan10%.Demandf

AACblocksandthermalinsulationproductswillremainrobustduetoongoinginfrastructurepu

andindustrialcapex.

Strong and extensive presence

HILhasanextensivepresenceacrossthecountryhaving~20.5%shareintheRoofingindustry(Asbest

CementFibreSheet)with12manufacturingfacilities,52salesdepotsandmorethan5,000salespoin

therebyprovidingextensiveproductreach.Thewidespreadpresencehasreducedthetimeanddistan

tomarketforHILproductsandhasalsoreducedthefreightcost.

HILsells itsCementFibreSheetunder thebrand Charminarwhich ithasestablishedoverthepast

decades.Charminarbrandcontinues toenjoypremiumbrandequity in themarketbasedon superi

quality,strengthanddurability.Thecompanyhasalsobeenabletoleverageonthebrandsupremacyf

its new allied products like AAC Blocks, building panels and boards, which are rapidly gainin

acceptanceasasubstituteforplywoodandothertraditionalmaterialuseforbuildingconstructions.

Large capacity,brand superiorityof Charminar and strongdistributionnetworkplacesHIL in

leadershipposition.

Fibre Cement Roofing Sheets on a strong foothold

The FibreCement Sheet Industry is estimated to grow at aCAGR ofmore than 10% in the comin

financial years on account of increased income in rural areas coupled with various initiatives b

Governmentbywayoflowcost/affordablehousingschemesforthebettermentoftheruralpopulatio

HILbeingoneof the leadingmanufacturersofFibreCementSheets in Indiawillbeoneof theprim

beneficiariesoftheincreasingdemand.

Inordertoparticipateinthefuturegrowthopportunitiesandtoreta

itsshare,theCompanyhasbeensettingupofnewplantsatstrateg

locationsand increasing theproductioncapacitiesofexistingplan

In the last financial year, it has augmented its cement she

manufacturingcapacityatVijayawadaplantby90,000MTtakingit

8.5lakhtonne.ThefullbenefitoftheVijaywadacapacitywillbese

inFY11.Further in the current financialyear,HIL acquired aFib

cement sheets manufacturing facility situated at Punjab with

capacityof45,000MT/Annum.Now,itisplanningtosetuptwone

plants (of90,000MTeach),one inBiharand theotheratanexistin

locationinUPatacapexofaround`70crore.Theplantsareexpect

to come on stream in CY11. With these plants, HIL intends

strengthenitspresenceintheEastofIndia.

ement Sheet Installed Capacity (in lakh tn)

7.68.5

9.910.8

0.0

2.0

4.0

6.0

8.0

10.0

12.0

FY09 FY10 FY11E FY12E

urce: Company, CD Research

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With the additional capacities established an

plannedfurtherduringtheyear,HILiswould

able to fully exploit the emerging opportuniti

inthesector.

We expectHILs cement sheet sales volumes

increase by 7.5% and 14.1% YoY to 7.84 lak

tonnesand8.95lakhtonnesinFY11EandFY12

respectively. Cement sheet realizations a

expected to to increaseby5%and3%YoY to

8767pertonneand`9030pertonneinFY11EanFY12E respectively. Revenuefrom cement she

businessisexpectedtogrowby12.9%and17.5

YoYto`688croreand`808croreinFY11EanFY12Erespectively.

AAC Blocks to drive growth in long term

Themarket forAAC Blocks is directly dependent on the construction ofmultistory apartments an

commercial buildings in particular. They are lightweight buildingmaterial that provides structur

insulation,fireandmoldresistanceinasinglematerial.AACBlockswithitsinherentadvantagessuch

afavourableweighttocompressivestrengthratio,usageofflyashandenergysavingpropertyandfast

rate of construction are fast becoming the choice of the new generation builders compared

conventionalclaybricks.

With the realty sectorhaving recovered from the slowdown, thisproduct is set towitness significagrowthinvolumesasbuildersconvertfromtheirconventionalbrickstogreenAACBlocks.HILbein

theonly listedplayer in this segment isexpected to reapbenefits incoming times.Thecompanyh

recentlyaugmenteditsAACblockmanufacturingcapacityto3.2lakhCuMbysettingupanewunit

2.2lakhCuMinGujaratinthelastquartertocatertothegrowingdemandinWesternregion.Ithas

marketshareofalmost38%inSouth.

WeexpectAACblockssalesvolume tomore tha

double to1.58 lakhCuM in the currentfinanci

yearandfurtherincreaseby52.4%YoYto2.4lak

CuMinFY12E.

Realisationsareexpected to increaseby3.5%an

3%YoY to ` 4043CuMand ` 4164perCuMFY11EandFY12Erespectively.

RevenuefromAAC block segment is expected

increaseby117.7%and57.0%YoYto`64crorean`100croreinFY11EandFY12Erespectively.

698119729767

784353895075

0

2000

4000

6000

8000

10000


0

200000

400000

600000

800000

1000000

Realisations (per tn) Sales (In Rs Mn) Volumes (MT)

urce: CD Research

90328 74882

157500

240000

0

800

1600

2400

3200

4000

4800


0

50000

100000

150000

200000

250000

Realisations (per CuM) Sales (In Rs Mn) Volumes (CuM)

urce: CD Research

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WeexpectthecontributionofAACblockbusinesstothetotalturnovertoincreaseincomingyear

whichwillderisk itsbusinessoperationsandwillprovide further stability tooverall revenues

demand for AAC block comes from industrial segment unlike demand for cement sheets th

dependsoncyclicalityofhousingsegment.AACblockbusinessalsocommandsmuchbetterEBITDmarginsofaround20%ascomparedtocementsheets,wheremarginshoverat1315%dependingo

cyclicality.

Thermal Insulation Products to maintain its growth momentum

HILmanufacturescalciumsilicatebasedinsulatingmaterialscalledHYSILandistheundisputedlead

withamarketshareof76%inthisspecialvarietyofinsulationproduct.Theseproductsareusedacro

differentindustriessuchascement,power,petrochemicals,fertilizeretc.

This product segment is expected to maintain its grow

momentumasall itsuser industriesare inexpansionmodeanhave huge industrial capex lined up during next 23 yea

According toCrisil, Indias total industrialcapexover theFY0

FY12periodwillgrowatCAGRof7%.

Inviewofthe increasingdemandandtomaintainits leadersh

position, HIL has increased its thermal insulation capacityb

2,500 tpa taking the totalcapacity to8,500 tpa inApril2010.A

perthemanagement,thisenhancedcapacityisfullybookedf

6months. It is further contemplatingputting up another 3,0

tpaplantinFY11foraCapexofabout`2530crore.

We expect thermal insulation sales volum

to increaseby37.1%and25.9%YoYto73

MT and 9200 MT in FY11E and FY12

respectively.

Realisationsareexpectedtodeclineby3.8

to ` 60000 per tonne in FY11 and remastableinFY12.

Revenue from this segment is expected

increaseby31.9%to`44croreinthecurrefinancialyearandby25.9% to` 55croreFY12E.

nstalled Capacity

6000 6000

11500 11500

0

2000

4000

6000

8000

10000

12000



92007310

5332

2728

0

200

400

600

800

1000

1200


0

2000

4000

6000

8000

10000

Realisations (per '00 tn) Sales (In Rs Mn) Volumes (MT)

ource: CD Research

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Healthy financial outlook

HILhasbeendeclaringexcellentsetofnumbersoverthelastfewyearsonthebackofstrongthrust

Government on Rural Housing, diversified product segment, superior brand quality and strondistributionnetwork.

Turnoverhasgrown at aCAGR of 21%over the la

threefinancialyearsto`704crinFY10drivenby23&21%CAGRinCementSheetandThermalInsulatio

business respectively. Net Profit has grown at

whoppingCAGRof156%over thesameperiodon t

back of sharp improvement inmargins anddecline

interestcost.

The

company

has

taken

a

number

of

initiatives

to

reducosts. These include increase in fuel efficienc

manpower rationalization, more automation

processes,reductioninfixedcostsetc.Thecompanyh

averystrongBalanceSheetwithaDebt:EquityRat

of0.25andaRoCEof43.50%.

Inthefirstquarterofcurrentfinancialyear,HILregisteredmutedsortofperformancemainlybecause

poormonsoonslastyearleadingtolowerruralincomeanddeclineinmarginsonthebackofincrease

excisedutyfrom4%to10%.

Goingforward,webelieveHILwillmaintainitsgrow

momentum on the back of aggressive capex plaacrosstheproductsegments.

Topline is expected togrowataCAGRof 19%ov

FY10 FY12Eonthebackof85%growthinAACBloc

revenues(onthebackoffullscaleoperationsleading

79%growth in volumes) and 29%growth inTherm

Insulation business (on the back of 31% growth

volumes).FlagshipproductCementSheetisexpected

registeratoplineCAGRof15%over thesameperi

ledby11%increaseinCementSheetsalesvolumes.

EBITDA margins are expected to ease a bit a

stabilizearound20%onthebackofmoderateincrea

inrawmaterialprices.

Increase indepreciation (Capexof` 115crore&`1croreinFY11&FY12respectively)andinterestexpens

wouldlimittheCAGRinNetProfitto12%overFY1

FY12E.

evenue Breakup Productwise

0%

20%

40%

60%

80%

100%


Fibre Sheets AAC Blocks Thermal Insulation Others


15.0%

22.4% 21.7% 20.6%

0

200

400

600

800

1000

1200

FY09 FY10 FY11E FY12E0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Sales Profit EBITDAM%


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Balance Sheet In . Crores

Year ended 31st March FY08 FY09 FY10 FY11E FY12E

SOURCES OF FUNDS

Equity Share Capital 7.49 7.49 7.49 7.49 7.49

Reserves 143.52 178.71 254.29 325.32 430.72

Total Shareholders Funds 151.01 186.20 261.78 332.81 438.21

Secured Loans 70.31 46.84 32.02 42.49 52.73

Unsecured Loans 21.46 33.48 32.61 40.64 42.90

Total Debt 91.77 80.32 64.63 83.13 95.63

Total Liabilities 242.78 266.52 326.41 415.94 533.84

APPLICATION OF FUNDS

Gross Block 238.36 282.21 321.11 465.19 540.19

Less: Accumulated Depreciation 109.14 122.41 137.51 159.84 185.77

Net Block 129.22 159.80 183.60 305.35 354.42Capital Work in Progress 22.99 36.53 69.08 40.00 65.00

Investments 9.45 9.34 9.23 9.23 9.23

Current Assets, Loans & Advances

Inventories 113.48 111.53 138.51 146.05 191.73

Sundry Debtors 47.89 50.61 52.49 59.77 70.45

Cash and Bank 16.28 10.46 10.50 15.02 23.32

Loans and Advances 22.07 19.03 21.77 25.57 30.68

Total Current Assets 199.72 191.63 223.27 246.41 316.18

Less: Current Liabilities and Provisions

Current Liabilities 91.90 97.52 123.59 144.44 169.89

Provisions 10.39 14.57 14.99 20.60 21.10Total Current Liabilities 102.29 112.09 138.58 165.05 190.99

Net Current Assets 97.43 79.54 84.69 81.36 125.19

Net Deferred Tax (16.31) (18.69) (20.19) (20.00) (20.00)

Total Assets 242.78 266.52 326.41 415.94 533.84

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Key Financial Ratios

Year ended 31st

March FY08 FY09 FY10 FY11E FY12E

Growth Ratios

Revenue (%) 10.14 28.67 13.71 17.97 20.38PBIDT (%) 10.60 127.52 69.71 15.89 14.78

Net Profit (%) (15.72) 228.02 100.16 9.90 14.56

EPS (%) (15.72) 228.02 100.16 9.90 14.56

Margins

PBIDTA Margin (%) 8.48 15.00 22.39 21.65 20.65

Net Profit Margin (%) 2.84 7.25 12.75 11.88 11.31

Return

ROCE (%) 12.23 29.59 43.50 37.85 33.79

RONW (%) 9.05 24.08 34.28 29.64 25.79

ValuationsMarket Cap / Sales 0.21 0.13 0.57 0.56 0.47

EV/PBIDTA 4.47 1.68 3.06 2.98 2.62

P / E 7.98 2.01 4.89 4.74 4.14

P / BV 0.74 0.48 1.67 1.32 1.00

Other Ratios

Debt-Equity Ratio 0.61 0.43 0.25 0.25 0.22

Current Ratio 1.95 1.71 1.61 1.49 1.66

Interest Cover Ratio 3.81 8.37 22.72 19.73 19.65

Turnover Ratios

Fixed asset turnover 3.72 3.87 3.83 2.72 2.82

Total asset turnover 1.98 2.32 2.16 2.00 1.87

Debtors turnover 10.04 12.23 13.41 13.89 14.18

Inventory turnover 4.24 5.55 5.08 5.68 5.21

Risk & Concerns

Asbestosisisalungdiseaseassociatedwithonesexposuretoasbestosproducts.Thusinthewestecountries, due to uncontrolled usage of Asbestos, there were cases of people suffering fro

Asbestosis. In India there is a ban on the usage ofblue andbrown varieties of asbestos. An

government initiative to completely ban the usage of asbestos will force industry to look f

alternative and may increase the overall cost. However, with government thrust on affordabhousingprojects,thereseemstoberemotechancesofcompletebanonusageofasbestos.

AnychangeordecreaseinspendingbythegovernmentthroughruralschemeslikeNREGA,IndiAwasYojnaetc.couldreducethepurchasingpowerofruralpeople.

Ruralincomeislargelydependentonagriculture,whichisafunctionofmonsoon.ApoormonsoocouldhaveadverseeffectonthedemandforroofinginruralIndia.

IncreaseinrawmaterialpriceshigherthanourexpectationswillnegativelyimpactHILsmargins.

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Valuation & Recommendation

With a healthygrowthinGDPandexpectationsofarobustdemand in thefuturefromRuralIndiao

accountofprojects likeNREGA&UIN leading tohigherdisposable income in thehandsof therurpopulation,cementsheetindustryispoised to growindoubledigitsinthecomingyears.HILbeingo

oftheleadingmanufacturersofCementSheetswillbeoneoftheprimebeneficiariesofthismove.

Diversification intovalueaddedgreenbuildingproductsaugurswell for thecompanyasdemand f

theseproductsare increasingacross theworldonaccountof serious concernsabout theenvironme

and the impact on energy consumption.Moreover, these diversifications helpHIL in derisking

businessmodelanddiversifyitsrevenuestream.

Increasingofcapacityacrosstheproductsegmentswillhelpthecompanytokeeppacewiththegrowin

demandforitsproductsandretainsignificantshareinthemarket. Goingforward,webelieveHILw

maintain its growth momentum on the back of strong thrust of Government on Rural Housin

diversifiedproductsegment,superiorbrandqualityandstrongdistributionnetwork.

Weexpect thetoplinetogrowataCAGRof19%overFY10 FY12Eon thebackof85%growth

AACBlocks revenues and 29% growth inThermal Insulation business. Flagship productCeme

Sheet isexpected to registera toplineCAGRof15%over the sameperiod ledby11% increase

CementSheet sales volumes.EBITDAmargin is expected to stabilize around 20% on theback

moderateincreaseinrawmaterialprices.NetProfitisexpectedtogrowataCAGRof12%.

Relativelyspeaking,HILhasfarsuperiorearningsprofileandreturnratiosincomparisontoitspeers.

hasastrongbalancesheetwithaDebt:EquityRatioof0.3,ROCEof~44%.Thecompanyhasthehighe

operatingmarginsincomparisontoitspeers.Giventhediversificationintovalueaddedproducts,w

stronglybelievethatHILisduetogetreratedandcommandmuchhighermultipleintimestocome

Given the favourable sector outlook, leadership position of the company, strong presence in nic

segments,robustdemandofitsproductsandlastlyaggressivecapexplans,thisstockseemsagoodbu

forinvestorslookingforstronggrowthinthecomingyears.

At the currentpriceof `624, the stock tradesataP/Emultipleof 4.7xand4.1xFY11EandFY12earningsrespectively.ItisalsoattractivelyvaluedatEV/EBITDAbasisof2.6xFY12Eearningsand

P/BVof1.0xFY12EBV.Withthisbackdropwebelievethistobeanexcellentopportunityforinvesto

werecommendaBUYonthestockwithapricetargetof` 754,assumingaP/Emultipleof5xFY12earnings,anupsideof21%fromthecurrentlevels,overaperiodof12months.

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Documents

HIL CD 230910