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Stock Data
Sector Containers & Packaging
Face Value(Rs) 2.00
52 wk. High/Low (Rs.) 275.00/90.00
Volume (2 wk. Avg.) 815467
BSE Code 515145
Market Cap(Rs in Mn) 19658.1
Financials (Rs in Mn) FY10A FY11E FY12E
Net Sales 13711 15356 17199
EBIDTA 3163 3404 3797
PAT 1552 1674 1888
EPS 17.77 19.17 21.62
P/E 12.6 11.7 10.4
HINDUSTHAN NATIONAL GLASS &
INDUSTRIES LTD BUY
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SYNOPSIS
We initiated the coverage of Hindusthan National Glass & Industries Ltd and set a target price of Rs.260.00 for medium to long term gains.
HNG was founded by Mr. C K Somany in 1946 following the commissioning of India’s first fully automated glass manufacturing plant at Rishra (near Kolkata).
At present, it is the key player in India’s container glass industry with a pan India presence and its plants located at Rishra, Bahadurgarh, Rishikesh, Neemrana, Nashik and Puducherry.
The company has signed a joint venture with Belgium based OMCO International NV, world’s leading glass mould manufacturers.
The revenue of the company for the year ended on March 31st increased 3.5% YoY while Profit increased 44% YoY.
The topline of the company are expected to grow at a CAGR of 9.1% over 2009A to 2012E.
1 Year Comparative Graph
HNGIL BSE SENSEX
V.S.R. Sastry
Equity Research Desk
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
C.M.P: Target Price: Rs.225.05 Rs.260.00
Share Holding Pattern
Date: 8 June 2010
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Peer Group Comparison
Name of the company CMP(Rs.)
Market Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
Hindusthan National
Glass Industries Ltd 225.05 19658.1 17.77 12.6 1.99 50
Uflex Ltd 109.15 7095.5 14.3 7.59 0.87 40
Tinplate Company of
India Ltd 72.00 5190.8 9.31 7.73 1.93 12.50
Manaksia Ltd 110.50 7683.5 3.56 31.04 1.45 110
Investment Highlights
FY10 Performance
Net profit of the company has increased at yoy 44% Rs.1552.00mn from
Rs.1077.50mn of same period of last year. Total revenue for the year stood at
Rs.13711.20 mn from Rs.13242.40 which is 3.5% increased than that of a year
ago. EPS for the year stood at Rs.17.77 per equity share of Rs.2.00 each.
Operating profit of the company stood at Rs.3163.40mn. OPM for the year stood at
23%. Expenditure of the company decreased 1.7% YoY to Rs.10781.10 mn.
Interest expenses for the year stood at Rs.471.7mn.
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Results Updates (Q4 FY10)
The bottomline of the company for the quarter decreased at 10% yoy Rs.243.80mn
from Rs.269.40mn of same period of last year. Total revenue for the fourth quarter
stood at Rs.3805.70 mn from Rs.3496.20 which is 9% increased than that of a
year ago.EPS for the quarter stood at Rs.2.79 per equity share of Rs.2.00 each.
Expenditure of the company increased 12.3% YoY to Rs.3208.10mn from
Rs.2856.50mn of same period of last year. Interest expenses for the quarter stood
at Rs.123.90mn. OPM & NPM for the quarter stood at 16% and 6% respectively.
Quarterly Results - Standalone (Rs in mn)
As At Mar-10 Mar-09 %Change
Net sales 3805.7 3496.2 9
PAT 243.8 269.4 (10)
Basic EPS 2.79 15.42
Equity Capital 174.7 174.7
Face Value 2 10
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The improved profitability in the year can be attributed to the focus on the
operational efficiencies during the year. The key highlight of the year has been
the successful implementation of NNPB technology in the plants that makes
glass bottles lighter by 15-20%. While the company have also identified
Greenfield projects in the south, the company’s focus for the year has been
mainly on improved profitability.
HNG signs a joint venture with OMCO - world’s leading glass mould
manufacturers
The company has signed a joint venture with Belgium based OMCO International
NV, world’s leading glass mould manufacturers. According to the venture, OMCO
and HNG will have a 50:50 shareholding pattern and will jointly set up and
operate mould manufacturing facilities in India under the name of OMCO HNG
Engineering Ltd. for designing, manufacturing, marketing and sales of moulds for
glass packaging products like beverages, liquor, food, pharmaceutical and
cosmetic use.
OMCO HNG Engineering Ltd. plans to set up its first plant in Pondicherry with an
estimated investment of Rs. 35 crores. The plant will be equipped with state-of-
the-art foundry and CNC machines to match global standards. The plant is
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expected to be operational by September 2010 with initial capacity of 4000 moulds
per month.
The joint venture is a stride by HNG towards becoming the complete glass
packaging solutions provider globally by strengthening its backward integration. It
is a great opportunity for the company to partner with world’s leading mould
manufacturers for their technical expertise and special designs.
As per the joint venture HNG will be providing civil and technical infrastructure,
while OMCO will be sharing its expertise on special designs and technologies
which are unavailable in India at present.
Company Profile
Hindusthan National Glass (HNG) a CK Somany group was founded by C K
Somany, a visionary entrepreneur in 1952 with the inauguration of India’s first fully
automatic glass container manufacturing plant at Rishra, near Calcutta (INDIA).
The HNG Group was launched under the banner of Hindusthan National Glass
Manufacturing Co. Ltd., subsequently renamed Hindusthan National Glass &
Industries Ltd. (HNGIL).
The company offers premium glass containers for every kind of application. HNGIL
is an acknowledged market leader of today and producing 6 million bottles per day
ranging from 5 ml to 3200 ml containers for multifarious industries like
pharmaceuticals, beverages, processed foods, cosmetics, liquors etc.
Its manufacturing facilities are strategically located at Bahadurgarh near Delhi
(since 1964), Rishikesh, Pondicherry and Nashik with state-of-the-art induction
furnace for manufacturing of castings in its own foundry. HNGIL has incorporated
its technology from the best suppliers in Europe and USA.
HNG Group operates 10 furnaces and 42 production lines with fully automatic IS
(Individual Section) machines up to 12 Sections operating on Double and Triple
Gob.
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All the plants have a thorough electronic inspection system right from the batch
mixing till the final packing. Quality control and R&D Sections are well equipped
with sophisticated instruments enabling production of international quality
glassware.
Well-equipped workshop to manufacture moulds for bottles of all designs & shapes,
backed up by own power generating plants.
The far-sighted and dynamic approach of C K Somany, the highly focused
management strategies and the leadership qualities of his sons Sanjay Somany and
Mukul Somany have turned every challenge into a winning formula.
As a result of which, in the 5 ml-3200 ml segment, HNG Group is the undisputed
market leader catering to around 70% of the Domestic Market in the
pharmaceutical, beverage, processed food, cosmetic and liquor sectors covering
industry majors like, CocaCola, Dabur, GlaxoWellcome, Nestle, Pepsi, Reckitt
Benckiser (India) Ltd., Smithkline Beecham, UB Group etc. Exports to South East,
Middle East, Africa and First World Countries in Europe & North America.
HNGIL has a wide and diversified customer base to its credit. Its clientele includes
leading companies like :
Pepsi Co., Coca-Cola, Cadbury’s, Nestle ,Raun Pollack, Dabur, Bayer, Lakme, Glaxo,
Pfizer, Reckitt & Coleman, Shaw Wallace, UB group
Product range of the company includes:
Premium glass containers like glass bottles/vials, for use in beverages industry,
cosmetics, pharmaceuticals, liquor and processed food industry.
Other companies under the HNG wing are Glass Equipment (India) Ltd. (GEIL),
Ceramic Decorators Ltd. (CDL), Somany Foam Limited (SFL) and Quality Minerals
Ltd. (QML). Besides, there are number of Investment Companies, Partnership Firms
and Charitable Trusts which are also part of the HNG Group.
• Glass Equipment ( India) Limited- GEIL's state-of-the-art technology accounts
for manufacture of sophisticated equipment for glass plants. It is also expert in
manufacturing of critical spares for Glass container manufacturing industries
and provides solutions in setting up glass plants on a turnkey basis.
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• Ceramic Decorators Limited- CDL provides decorative printing on bottles with
the latest machines and Lehrs.
• Somany Foam Limited- Project being set up at BHEL Industrial Area,
Haridwar to manufacture all types of FOAM with an Capital outlay of Rs.36
Crores.
• HNG Float Glass Limited- HNG group is planning to come up with an
integrated 600 TPD Float Glass Project in the State of Gujarat at a capital
outlay of Rs.550 crores. The commercial production for architectural processing
and building glass will start by 1st quarter of 2008-09.
Financials Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY09A FY10A FY11E FY12E
Description 12m 12m 12m 12m
Net Sales 13,242.40 13,711.20 15356.54 17199.33
Other Income 85 233.3 209.97 220.47
Total Income 13,327.40 13,944.50 15566.51 17419.80
Expenditure -10,968.20 -10,781.10 -12162.38 -13621.87
Operating Profit 2,359.20 3,163.40 3404.13 3797.93
Interest -434.5 -471.7 -509.44 -560.38
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Gross profit 1,924.70 2,691.70 2894.70 3237.55
Depreciation -747.5 -861.2 -947.32 -1042.1
Profit Before Tax 1,177.20 1,830.50 1947.38 2195.50
Tax -99.7 -278.5 -272.63 -307.4
Net Profit 1,077.50 1,552.00 1674.74 1888.13
Equity capital 174.7 174.7 174.70 174.70
Reserves 8,241.60 9,260.70 10,935.44 12,823.57
EPS 61.68 17.77 19.17 21.62
*Face Value has been changed from Rs.10/- to Rs.2/-
Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) Sep-09A Dec-09A Mar-10A June-10E
Description 3m 3m 3m 3m
Net sales 3,024.80 3,577.40 3,805.70 3995.99
Other income 155.4 18.9 10.10 11.11
Total Income 3,180.20 3,596.30 3,815.80 4007.10
Expenditure -2,343.30 -2,861.60 -3,208.10 -3196.79
Operating profit 836.90 734.70 607.70 810.31
Interest -122.2 -125.5 -123.90 -127.62
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Gross profit 714.70 609.20 483.80 682.69
Depreciation -218.4 -233.4 -209.00 -219.45
Profit Before Tax 496.30 375.80 274.80 463.24
Tax -93.3 -45.2 -31.00 -52.26
Net Profit 403.00 330.60 243.80 410.98
Equity capital 174.7 174.7 174.7 174.70
EPS 23.07 3.78 2.79 4.71
*Face Value has been changed from Rs.10/- to Rs.2/-
Key Ratio
Particulars FY09 A FY10 A FY11 E FY12 E
EBIDTA % 18% 23% 22% 22%
PAT % 8% 11% 11% 11%
P/E ratio (x) 3.65 12.67 11.74 10.41
ROCE - % 12% 15% 14% 14%
ROE - % 13% 16% 15% 15%
Price/Book Value 0.47 2.08 1.77 1.51
Debt Equity Ratio 0.60 0.59 0.55 0.52
Book Value (Rs.) 481.76 108.02 127.19 148.81
EV/EBIDITA (x) 1.67 6.21 6.35 6.21
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Charts:
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Outlook and Conclusion
• At the current market price of Rs.225.05, the stock trades at a P/E of 11.74x and
10.41x for FY11E and FY12E respectively.
• On the basis of EV/EBDITA, the stock trades at 6.35x and 6.21x for FY11E and
FY12E respectively.
• Price to Book Value of the stock is expected to be at 1.77 and 1.51 respectively for
FY11E and FY12E.
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• EPS of the company is expected to be at Rs.19.17 and Rs.21.62 for the earnings of
FY11E and FY12E respectively.
• The Net sales of the company are expected to grow at a CAGR of 9.1% over 2009 to
2012E.
• Face Value has been changed from Rs.10/- to Rs.2/-
• The company has signed a joint venture with Belgium based OMCO International
NV, world’s leading glass mould manufacturers.
• OMCO HNG Engineering Ltd. plans to set up its first plant in Pondicherry with an
estimated investment of Rs. 35 crores.
• The plant will be equipped with state-of-the-art foundry and CNC machines to
match global standards. The plant is expected to be operational by September
2010 with initial capacity of 4000 moulds per month.
• We recommend ‘BUY’ in this particular scrip with a target price of Rs.260.00 for
Medium to Long Term Gains.
Industry Overview
Indian packaging industry
• Indian packaging industry is estimated at US$ 14 billion and growing at a rate of
more than 15% annually. These figures indicate a change in the industrial and
consumer set up.
• The Indian fascination for rigid packaging remains intact. It is estimated that more
than 80% of the total packaging in India constitutes rigid: packaging, the oldest and
the most conventional form of packaging. The remaining 20% comprises flexible
packaging.
• India's per capita packaging consumption is less than US$ 15 against world wide
average of nearly US$ 100.
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• The large and growing Indian middle class, along with the growth in organised
retail in the country, are driving demand in the packaging industry. Another factor,
providing substantial stimulus to the packaging industry, is the rapid growth of
exports, requiring superior packaging standards for the international market.
[Source: IBEF]
Container glass industry
Overview
The Indian container glass market is estimated at 320 million euro accounting for
12% of the packaging industry. The market for container glass has been growing at
a rate of 8% over the last five years. The demand in the container glass industry is
driven by a growth in end-user segment like processed foods (FMCG), beverages,
beer, liquor, pharmaceutical and retail.
Advantage glass
• Environment friendly
• Natural product
• Lowest pollution (total life cycle) - emissions at various recycling levels are lower in
glass compared to aluminium and PET
• Light and convenient
• Inertness to heat
• Inertness to ultra-violet rays
• Visibility of product
• Lowest cost (per life cycle)
• Longer re-cyclability
• Versatility of design
Glass recycling
• Save energy in manufacturing for each tonne of cullet '.(recyclable glass) used,
energy consumption is reduced by 2.5%
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• Reduces emissions (including Co2)
• Preserves raw materials and landscapes
Each tonne of cullet used means
• 1 tonne less of land fill
• Over 1 tonne less of natural resources depletion
Growth drivers
Growing food processing industry
The Indian food market, according to the 'India Food Report 2008', is estimated at
over US$ 182 billion, and accounts for about two thirds of the total Indian retail
market. Further, according to consultancy firm McKinsey, the retail food sector in
India, is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by
2025, accounting for a large chunk of the world food industry. This would grow,
from US$ 175 billion to US$ 400 billion by 2025, driving the demand for packaging:
alternatives, especially glass containers. [Source: IBEF] .
Increasing rural consumption
The FMCG industry in India was worth around US$ 16. 03 billion as on August
2008, and the rural market accounted for a robust 57% share of the total FMCG
market in India, overtaking the urban market (43%). The rural per capita
consumption of FMCGs would equal to current urban levels by 2017. Industry
analysts also expect the FMCG sector in rural areas to grow 40% against 25% in
urban. [Source: IBEF]
Growing beer consumption
The Indian beer industry has been witnessing steady growth of 7-9% per year over
the last 10 years. The rate of growth remained steady in recent years, with volumes
passing from mere 70 million cases in 2002 to 155 million cases in 2008. The
Indian beer market is dominated by strong beers (>5% alcohol by volume), which
accounts for 70% of the total beer industry. The premium beer market is a mere 5%
of the total but this segment is rapidly expanding, touching a growth rate between
35-40%. As a result, the demand for container bottle will surge. [Source: All India
Brewers' Association]
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Outlook
The Indian economy is projected to achieve a sustainable GDP growth of around
6.5% whereas the annual growth of the packaging industry is expected to double to
around 20-25%. The container, glass industry, which grew at a compounded annual
growth rate (CAGR) of 8% over five years, is expected to grow over 8% in the future.
[Source: IBEF]
The demand for container glass will grow on account of the forecasts that packaging
material for beverages will mainly be of glass, especially for high quality packaging.
Glass container plants will improve technology levels to produce thin and light-
weighted bottles. Beer bottles should be made in more specifications, meeting the
demands of customers at various levels. Based on the analysis of the current
market demands at home and abroad, tubular vials for antibiotic use will increase
gradually, although injection vials will still remain in the greatest demand
_______________ ____ _________________________
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This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
16
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