Embed Size (px)
Citation preview
CMP 296.55
Target Price 340.00
ISIN: INE415A01038
NOVEMBER 12th 2015
HSIL LTD
Result Update(PARENT BASIS): Q2 FY16
FY 13
BUY
Stock Details
Stock Data
Sector Containers & Packaging
BSE Code 500187
Face Value 2.00
52wk. High / Low (Rs.) 477.00/238.00
Volume (2wk. Avg ) 16000
Market Cap ( Rs in mn.) 21440.57
Annual Estimated Results (A*: Actual / E*: Estimated)
Years FY15A FY16E FY17E
Net Sales 18570.20 19870.11 21658.42
EBITDA 3450.50 3519.87 3856.61
Net Profit 1041.50 1174.09 1327.66
EPS 14.41 16.24 18.36
P/E 20.59 18.26 16.15
Shareholding Pattern (%)
As on Sep 2015 As on Jun 2015
PROMOTER 47.11 47.11
FIIs 10.39 10.24
DIIs 23.31 25.03
OTHERS 19.19 17.62
1 Year Comparative Graph
HSIL LTD BSE SENSEX
SYNOPSIS
HSIL Limited is the largest Indian manufacturer of Sanitaryware products and Packaging Products.
During Q2 FY16, the company net profit jumps to Rs. 243.30 mn against Rs. 190.70 mn in Q2 FY15, an increase of 27.58%.
The company achieved a turnover of Rs. 4293.90 mn for the 2nd quarter of the current year 2015-16 as against Rs. 4238.30 mn in the corresponding quarter of the previous year.
In Q2 FY16, EBIDTA is Rs. 767.30 mn as against Rs. 765.20 mn in the corresponding period of the previous year.
During the quarter, PBT stood at Rs. 385.90 mn as against Rs. 286.00 mn over the corresponding quarter of previous year, an increase of 34.93%.
EPS of the company stood at Rs. 3.37 a share during the quarter, registering 16.55% increased over previous year period.
During Q2 FY16, Building Products segment grew up by 9% to Rs. 2468.80 mn from Rs. 2267.60 mn in Q2 FY15.
During Q2 FY16, Packaging Products segment stood at Rs. 1817.30 mn as compared to Rs. 1964.60 mn in Q2 FY15.
During H1 FY16, revenue stood at Rs. 8422.40 mn as compared to Rs. 8359.80 mn in H1 FY15.
During H1 FY16, PAT was up by 22.37% to Rs. 416.80 mn from Rs. 340.60 mn in H1 FY15.
Net Sales & PAT of the company are expected to grow at a CAGR of 8% and 7% over 2014 to 2017E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
HSIL LTD 296.55 21440.57 14.41 20.59 2.12 175.00
Uflex Ltd 173.80 12449.30 22.50 7.66 0.74 27.00
Time Technoplast Ltd 57.25 11945.20 3.36 16.92 1.45 50.00
Kajaria Ceramics Ltd 882.80 68736.70 25.04 34.54 9.52 200.00
QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q2 FY16,
Months Sep-15 Sep-14 % Change
Net Sales 4293.90 4238.30 1.31
PAT 243.30 190.70 27.58
EPS 3.37 2.89 16.55
EBITDA 767.30 765.20 0.27
The company net profit jumps to Rs. 243.30 million against Rs. 190.70 million in the corresponding quarter
ending of previous year, an increase of 27.58%. The company achieved a turnover of Rs. 4293.90 million for the
2nd quarter of the current year 2015-16 as against Rs. 4238.30 million in the corresponding quarter of the
previous year. Reported earnings per share of the company stood at Rs. 3.37 a share during the quarter,
registering 16.55% increased over previous year period. Profit before interest, depreciation and tax is Rs. 767.30
million as against Rs. 765.20 million in the corresponding period of the previous year.
Break up of Expenditure
Particulars
Rs. Million
Q2 FY16 Q2 FY15 %
Change
Cost of Material Consumed
877.80 923.00 -5%
Purchase of stock in trade
799.50 828.00 -3%
Employee Benefit Expenses
559.40 476.60 17%
Power and fuel 610.20 760.30 -20%
Depreciation & Amortization
289.60 290.30 0%
Other Expenditure 1067.00 946.10 13%
Segment Revenue
Company Profile
HSIL Limited is the flagship Company of the Somany Group and was established in 1960 with a joint venture of
the Group with Twyfords, UK. HSIL Ltd is the leading bathroom products Company with its brand ‘hindware’ and
second biggest player in Container Glass. HSIL Ltd constitutes two primary business divisions, Building Products
and Packaging Products. Within the ‘Building Products Division’ the product line includes; sanitaryware, faucets,
wellness and other allied products, kitchen appliances and vents. The product basket is available in the market
under the brands; hindware Italian Collection, hindware Art, hindware, Amore, Vents and Benelave. Luxury
brand Queo, from Barwood, UK is also a part of the product portfolio.
The “Packaging Products Division”, constitutes glass & PET bottles, available under brand AGI and Garden
Polymers (GP) respectively. It is the second largest glass bottle manufacturer, in South of India.
Financial Highlight (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Million)
Balance Sheet as at March 31, 2014 -2017E
FY14A FY15A FY16E FY17E
EQUITY AND LIABILITIES:
Shareholders’ Funds:
Share Capital 132.10 144.60 144.60 144.60
Reserves and Surplus 11082.67 14212.33 15633.56 17196.92
A. Sub Total - Net worth 11214.77 14356.92 15778.16 17341.52
Non-Current Liabilities:
a) Long-term borrowings 5473.19 3571.10 2785.46 2284.08
b) Deferred Tax Liabilities [Net] 1154.04 1044.99 1086.79 1141.12
c) Other Long Term Liabilities 154.38 179.90 206.88 231.71
d) Long Term Provisions 42.20 47.07 53.66 59.56
B. Sub Total - Non-Current Liabilities 6823.81 4843.06 4132.79 3716.47
Current Liabilities:
a) Short-term borrowings 3723.44 1882.33 2936.43 3406.26
b) Trade Payables 1371.00 1285.09 1387.90 1485.05
c) Other Current Liabilities 3638.52 4057.37 3976.22 4214.79
d) Short Term Provisions 276.29 393.67 145.66 167.51
C. Sub Total-Current Liabilities 9009.25 7618.46 8446.21 9273.61
Total Liabilities (A+B+C) 27047.83 26818.44 28357.15 30331.60
Non-Current Assets
Fixed Assets
i. Tangible assets 14523.04 15315.60 16081.38 16975.36
ii. Intangible Assets 349.27 279.77 302.15 323.30
iii. Capital work-in-progress 1193.09 335.43 372.33 409.56
a) Sub Total-Fixed Assets 16065.40 15930.80 16755.86 17708.22
b) Non Current Investments 1327.40 1444.86 1574.90 1685.14
c) Long Term Loans and Advances 498.02 278.71 457.09 557.65
d) Other non-current assets 16.95 13.56 10.71 12.21
D. Sub Total - Non-Current Assets 17907.77 17667.93 18798.55 19963.22
Current Assets:
a) Inventories 4057.30 4357.14 4836.43 5271.71
b) Trade Receivables 4093.78 4067.47 3659.96 3879.55
c) Cash and Bank Balances 584.69 239.65 215.68 237.25
d) Short Term Loans and Advances 384.85 465.93 825.40 957.46
e) Other Current Assets 19.44 20.32 21.13 22.40
E. Sub Total-Current Assets 9140.06 9150.51 9558.60 10368.38
Total Assets (D+E) 27047.83 26818.44 28357.15 30331.60
Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 17464.80 18570.20 19870.11 21658.42
Other Income 37.30 36.10 42.60 44.73
Total Income 17502.10 18606.30 19912.71 21703.15
Expenditure -14791.00 -15155.80 -16392.84 -17846.54
Operating Profit 2711.10 3450.50 3519.87 3856.61
Interest -678.90 -735.50 -507.50 -532.87
Gross profit 2032.20 2715.00 3012.37 3323.74
Depreciation -1057.00 -1192.50 -1252.13 -1327.25
Profit Before Tax 975.20 1522.50 1760.25 1996.49
Tax -413.20 -481.00 -586.16 -668.82
Net Profit 562.00 1041.50 1174.09 1327.66
Equity capital 132.10 144.60 144.60 144.60
Reserves 7855.90 9985.60 11159.69 12487.35
Face value 2.00 2.00 2.00 2.00
EPS 8.51 14.41 16.24 18.36
Quarterly Profit & Loss Statement for the period of 31st Mar, 2015 to 31st Dec, 2015E
Value(Rs.in.mn) 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15E
Description 3m 3m 3m 3m
Net Sales 5589.10 4128.50 4293.90 4680.35
Other income 5.20 12.70 11.10 12.21
Total Income 5594.30 4141.20 4305.00 4692.56
Expenditure -4530.30 -3488.70 -3537.70 -3833.21
Operating profit 1064.00 652.50 767.30 859.35
Interest -179.70 -104.20 -91.80 -97.31
Gross profit 884.30 548.30 675.50 762.05
Depreciation -309.10 -282.20 -289.60 -306.98
Profit Before Tax 575.20 266.10 385.90 455.07
Tax -177.20 -92.60 -142.60 -151.54
Net Profit 398.00 173.50 243.30 303.53
Equity capital 144.60 144.60 144.60 144.60
Face value 2.00 2.00 2.00 2.00
EPS 5.50 2.40 3.37 4.20
Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 8.51 14.41 16.24 18.36
EBITDA Margin (%) 15.52 18.58 17.71 17.81
PBT Margin (%) 5.58 8.20 8.86 9.22
PAT Margin (%) 3.22 5.61 5.91 6.13
P/E Ratio (x) 34.85 20.59 18.26 16.15
ROE (%) 7.04 10.28 10.39 10.51
ROCE (%) 21.93 29.79 28.03 28.29
Debt Equity Ratio 1.15 0.54 0.51 0.45
EV/EBITDA (x) 10.40 7.72 7.66 6.97
Book Value (Rs.) 120.94 140.11 156.35 174.72
P/BV 2.45 2.12 1.90 1.70
Charts
Outlook and Conclusion
At the current market price of Rs.296.55, the stock P/E ratio is at 18.26 x FY16E and 16.15 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs. 16.24 and Rs.
18.36 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 8% and 7% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 7.66 x for FY16E and 6.97 x for FY17E.
Price to Book Value of the stock is expected to be at 1.90 x and 1.70 x for FY16E and FY17E respectively.
The company’s debt equity-ratio as on date (September 30, 2015) stood at 0.68 down from 1.50 (September 30,
2014). HSIL is on track to reap the benefits of India’s ‘sanitation’ and ‘made in India’ initiatives/campaigns
announced by the Indian government. Though the demand in glass industry on whole is still to revive, the
divisions improved financial health and strong customer engagement approach will be the way forward towards
next level of business growth. Hence, we recommend ‘BUY’ in this particular scrip with a target price of
Rs.340.00 for Medium to Long term investment.
Industry Overview
BUILDING PRODUCTS INDUSTRY
Sanitaryware and bathroom fittings
India’s sanitaryware market has been following an upward trajectory over the last few years. The country has
emerged as a major bath and sanitaryware market in the Asia Pacific. India’s sanitaryware market consists of
organised and unorganized players, with organised players holding the majority share in terms of value.
However, in terms of volume unorganised players are predominant.
Sanitaryware market
India’s sanitaryware industry grew at a compound annual growth rate (CAGR) of 18.1% in 2010-14. The industry
size is estimated to be around Rs. 35 billion in 2015 and is expected to grow at a CAGR of 12% till 2017. The
organised market will grow at a higher rate of 14-15% owing to the increasing number of foreign players, rising
urbanisation and growing demand for premium range of products.
Bath fittings – faucet market
India’s faucet market grew at a CAGR of 16.7% in 2010-14. The industry size is estimated to be around Rs. 60
billion in 2015 and is expected to grow at a CAGR of 15% till 2017.
Demand drivers
Housing shortage
The government aims to develop about 11 crores of housing units, including developments to counter the
current shortage of about 6 crore units. Besides, the government plans to provide housing to all Indian citizens
by 2022. The housing need is almost equally distributed in urban and rural areas in the range of 5-6 crore units
and primarily consists of affordable houses.
Moreover, the Smart Cities Mission announced by the Indian Government requires Rs. 48,000 crores (US$ 7.75
billion) to be spent over the next five years in building the proposed 100 smart cities in India.
With new residential and commercial establishments expected to come up, the demand for sanitaryware will also
strengthen. Additionally, builders too have started to understand the importance of having bathrooms with a
premium look, as demand for such units is rising. Indian customers are gradually purchasing more premium and
technology-driven products due to their growing earnings and propensity to spend. The returns on high end flats
are better to real-estate players.
Demand for premium products
More people in India are seeing sanitaryware products, rather bathroom products as a medium through which
they can showcase their wealth and premium lifestyle. This has caused the sanitaryware market to gradually
incline towards creating a premium, niche segment within their offerings. This shift from the midsegment to the
premium sub-segment has been largely due to the result of higher spending power and change in perceptions of
bath products as lifestyle products.
Urbanisation and rise in middle class
The movement of population to town and cities for jobs is resulting in urbanisation. By 2025, India will have six
megacities, accommodating a population of 10 million or more. As per estimates, India will have 63 cities with a
population of one million or more, compared to 43 cities in 2011. Increasing urbanisation and awareness for
basic sanitation will create more demand for sanitaryware in the coming years.
India has the potential to become the world’s largest middle class consumer market with total consumer spend
of nearly US$ 13 trillion by 2030. This segment is embracing international lifestyles, translating into a surge in
for modern amenities.
PACKAGING PRODUCTS INDUSTRY
Container Glass Segment
Container glass plays a critical role in the packaging industry. Sectors using container glass include liquor and
beer segment, food and beverages, the pharma industry as well as the cosmetics industry and perfumeries.
Growth in per capita income, changing lifestyle patterns and focus on health awareness are some of the key
drivers of this product segment.
Increasing competition, necessity for labelling of quality, quantity and price of goods according to government
approved norms and preferences for packaged goods are some of the factors that have resulted in innovation and
introduction of technology in the packaging market.
According to TechNavio, the global container and packaging giant, the market is expected to grow at a CAGR of
6.87% over the period 2014-19. India’s packaging industry is growing constantly and the total worth is about
US$ 8.7 billion. The average annual growth rate is about 13-15%.
There is significant headroom for growth as India’s per capita consumption of packaging is only 4.3 kgs, whereas
in neighbouring Asian countries like China and Taiwan, the consumption is about 6 kgs and 19 kgs, respectively.
This shows that there are many more products, which need to be promoted in packaged conditions. Such a
scenario reflects a great business opportunity for India’s packaging industry
Outlook
The outlook for creating new, unique products is positive given the rising demand for such categories. These are
gaining popularity because they are aesthetically pleasing, eco-friendly and technologically advanced.
The sanitaryware industry is expected to perform better owing to political stability, consistent focus on reforms
and growing investments in infrastructure. With growing affluence, more people will shift towards
contemporary products in the bathroom products’ segment. In addition, nuclearisation of families and the need
for personal space will increase the demand for such products. The government’s focus on cleanliness, sanitation
and house for all are also expected to increase sales.
The demand for glass and PET bottles is likely to grow on account of a trend towards well packaged, branded
products rather than the loose and unpackaged formats. Besides rising development in medicine consumption,
the acceptance of stricter regulations and standards governing the production, storage, distribution and labelling
of pharmaceuticals will boost growth opportunities for packaging products and accessories.
Disclaimer:
This document is prepared by our research analysts and it 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 we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its 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. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.
Firstcall India Equity Research: Email – [email protected]
C.V.S.L.Kameswari Pharma & Diversified
U. Janaki Rao Capital Goods
B. Anil Kumar Auto, IT & FMCG
M. Vinayak Rao Diversified
G. Amarender Diversified
Firstcall Research Provides
Industry Research on all the Sectors and Equity Research on Major Companies
forming part of Listed and Unlisted Segments
For Further Details Contact:
Tel.: 022-2527 2510/2527 6077 / 25276089 Telefax: 022-25276089
040-20000235 /20000233
E-mail: [email protected]
www.firstcallresearch.com
