1. business and industrial

First Cut Analysis
January 16, 2015
Current
Q3FY15 Results Outperform; Packaging Products shine;
Maintain BUY
Previous
CMP : Rs.412
Rating : BUY
Rating : BUY
Target : Rs.485
Target : Rs.485
Standalone (Rs Mn)
STOCK INFO
BSE
500187
NSE
HSIL
Bloomberg
HSI IN
Reuters
HSNT.BO
Sector
Ceramic Products & Containers
Index
S&P BSE 500
Face Value (Rs)
2
Equity Capital (Rs mn)
132
Mkt Cap (Rs mn)
27,212
52w H/L (Rs) (Adj.)
423/82
3m Avg Daily Volume (BSE + NSE)
2,87,151
SHAREHOLDING PATTERN
%
(as on Sep. 2014)
Promoters
FIIs
DIIs
Public & Others
51.6
11.4
19.5
17.5
Source: BSE
STOCK PERFORMANCE (%)
HSIL
SENSEX
1m
12
3
3m
2
7
12m
295
32
Source: Capitaline, IndiaNivesh Research
HSIL v/s SENSEX
450
400
350
300
250
200
150
100
50
Sensex
Source: Capitaline, IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in
Prerna Jhunjhunwala
Research Analyst
Tel: +91 22 66188848
prerna.jhunjhunwala@indianivesh.in
IndiaNivesh Research
Jan‐2015
Dec‐2014
Oct‐2014
Nov‐2014
Sep‐2014
Aug‐2014
Jul‐2014
Jun‐2014
Apr‐2014
May‐2014
Mar‐2014
Jan‐2014
Feb‐2014
0
HSIL
HSIL Ltd.
Net Sales
EBIDTA
PAT
EPS
Q3 FY15 Q2FY15 Q3 FY14 QoQ (%) YoY (%)
4,555
877
303
4.6
4,171
680
191
2.9
3,613
556
118
1.8
9.2
28.9
58.8
58.8
26.1
57.8
156.9
156.9
INSPL Variance
Estimate
(%)
4238
7.5
737
19.0
199
52.5
3.0
52.5
Source: Company, IndiaNivesh Research
HSIL Ltd reported Q3FY15 results that outperformed our estimates as well as street
estimates. The company reported topline growth of 26.1% yoy with bottomline
growth of 156.9% yoy. This strong bottomline growth is on account of low base in
Q3FY14 where the company had reported losses in packaging products segment.
Packaging products performance surprised positively while building products
segment performance surprised negatively in Q3FY15.
HSIL reported 26.1% growth in net sales at Rs 4555 mn against our expectation of
Rs 4238 mn, outperforming our estimates by 7.5%. This outperformance was mainly
on account of packaging products segment. Packaging Products segment surprised
us positively as it reported 52.7% yoy sales growth in Q3FY15. The revenue of the
segment reached Rs 2339 mn in Q3FY15 from Rs 1531 in Q3FY14. Building products
segment surprised us negatively with a meagre growth rate of 7% yoy. However, in
our opinion, lower growth could be due to delay in sales to distributors as there
was inventory built-up with them. Also, the company had discontinued with tiles
business, which could have impacted the segment growth. We would seek
clarification from the management on lower growth in building products and its
likely future performance. The net sales of building products segment reached
Rs 2281.9 mn in Q3FY15 from Rs 2133 mn in Q3FY14.
The company reported 57.8% yoy growth in EBITDA at Rs 877 mn against our
expectation of Rs 737 mn. EBITDA margin stood at 19.3% in Q3FY15 against 15.4%
in Q3FY14 (INSPL est: 17.4%), an improvement of 388 bps yoy. This is on account of
lower power cost and other expenses which were partially offset by higher raw
material cost. EBIT margin in building product segment contracted 190 bps yoy to
reach 18.5% against 20% in Q3FY14 and 18.5% in Q2FY15 (INSPL est: 20%). However
for packaging products, EBIT margin reported at 13.4% in Q3FY15 against 1.1% in
Q3FY14 and 7% in Q2FY15 (INSPL est: 7%).
PAT reported at Rs 303 mn against our expectation of Rs 199 mn. PAT of the company
stood at Rs 303 mn against Rs 118 mn in Q3FY14, signifying growth of 156.9% yoy.
This is far above our estimate of Rs 199 mn, outperforming by 52.5%. In our opinion,
this can be attributed to outperformance in packaging products segment both on
topline and profitability fronts.
In 9mFY15, HSIL reported 16.4% sales growth to reach Rs 12798 mn from Rs 10995
mn in 9mFY14. This was driven by 6.1% yoy growth in building products and 28.3%
yoy growth in packaging products segment. EBITDA grew 51.3% yoy to reach
Rs 2172 mn in 9mFY15 against Rs 1436 mn in 9mFY14. This is on account of
decline in power and fuel cost and other expenses which was partially offset by
increase in raw material cost. Building products segment reported EBIT margin of
19.3% in 9mFY15 against 19.8% in 9mFY14. Packing products segment reported
profit of 7.7% in 9mFY15 against loss of 1.7% in 9mFY14. PAT stood at Rs 644 mn in
9mFY15 against Rs 268 mn in 9mFY14, growing by 139.8% yoy. This strong growth
was aided by lower growth in interest cost and lower effective tax rate.
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
First Cut Analysis (contd...)
Valuation and Outlook
At CMP of Rs 412, HSIL trades at PE of 28.9x and 18.3x its FY15E and FY16E earnings of Rs 14.2 and Rs 22.5 per share respectively.
Taking a holistic view, HSIL has reported strong results for Q3FY15. However, building products segment which used to report
superior results disappointed against our expectations. Also, we seek clarification on sustainability of strong topline growth and
increased profitability of packaging products segment, which outperformed in Q3FY15. We would revisit our estimates, if required,
after the conference call with management. We maintain BUY rating on the stock with target price of Rs 485.
Standalone Financial Performance
Rs in mn
Q3 FY15
Net sales
4,555
4,171
3,613
9.2
26.1
12,798
10,995
16.4
Raw Materials
Power and Fuel
Staff cost
Other expenditure
Operating Expenses
1,504
725
523
927
3,678
1,307
760
477
946
3,490
968
868
416
806
3,057
15.0
‐4.7
9.7
‐2.1
5.4
55.4
‐16.5
25.8
15.0
20.3
4,330
2,170
1,429
2,697
10,626
2,975
2,903
1,194
2,489
9,560
45.5
‐25.3
19.7
8.4
11.2
EBITDA
EBITDA Margin (%)
877
19.3%
680
16.3%
556
15.4%
28.9
294 bps
57.8
388 bps
2,172
17.0%
1,436
13.1%
51.3
391 bps
Other Operating Income
Other Income
Depreciation
Profit bef. Int. & Tax
66
8
318
634
68
17
290
475
53
6
244
370
‐1.8
‐55.2
9.4
33.4
26.2
40.0
30.1
71.4
184
31
883
1,503
179
28
695
948
2.4
12.0
27.1
58.6
Interest & finance ch.
Profit before tax
196
438
189
286
179
190
3.7
53.0
9.3
130.1
556
947
495
452
12.3
109.3
Total tax expenses
Add/Less: Extraordinary Items
Net profit
135
0
303
95
0
191
72
0
118
41.3
86.3
156.9
184
0
268
65.0
58.8
304
0
644
139.8
PAT
303
191
118
58.8
156.9
644
268
139.8
30.8%
6.6%
33.3%
4.6%
38.0%
3.3%
207 bps
339 bps
32.1%
5.0%
40.7%
2.4%
259 bps
4.6
2.9
1.8
58.8
156.9
9.7
4.1
139.8
Effective tax rate
Adj. PAT Margins (%)
EPS
Q2FY15 Q3 FY14 QoQ (%)
YoY (%)
9mFY15 9mFY14
Chg (%)
Source: Company, IndiaNivesh Research
Standalone Segmental Performance
Rs in mn
Revenue (Rs Mn)
Building Products
Packaging Products
Others
Total
Q3 FY15
Q2FY15 Q3 FY14 QoQ (%)
YoY (%)
9mFY15 9mFY14
Chg (%)
2282
2339
1
4621
2268
1965
6
4238
2133
1531
1
3666
0.6
19.0
‐86.9
9.0
7.0
52.7
‐20.0
26.1
6472
6496
14
12981
6099
5062
14
11175
6.1
28.3
‐6.3
16.2
EBIT (Rs Mn)
Building Products
Packaging Products
Others
Total
421
313
-2
733
419
138
4
561
426
16
-1
440
0.5
127.9
‐141.9
30.7
‐1.1
NA
28.6
66.4
1247
503
7
1757
1205
-87
7
1125
3.5
NA
1.4
56.2
EBIT Margin (%)
Building Products
Packaging Products
Others
18.5
13.4
-225.0
18.5
7.0
70.5
20.0 (190 bps) (150 bps)
1.1 640 bps 1235 bps
-140.0
NA
NA
19.3
7.7
53.3
19.8
-1.7
49.3
(49 bps)
NA
403 bps
Source: Company, IndiaNivesh Research
IndiaNivesh Research
HSIL Ltd|First Cut Analysis
January 16, 2015 | 2
First Cut Analysis (contd...)
Consolidated Financial Statement
Balance sheet
Income statement
Y E March (Rs m)
Net sales
Growth %
Expenditure
Raw Material
Power and Fuel
Employee
Others
EBITDA
Growth %
EBITDA Margin %
Other Income
Depreciation and amortisation
EBIT
EBIT Margin %
Interest
Exceptional/Extraordinary item
PBT
PBT Margin %
Tax
Effective tax rate %
PAT
Adj. PAT
Growth%
Adj. PAT Margin %
FY 12 FY 13
14456 17367
34.5
20.1
12130 15026
4741 5428
2766 4037
1591 1822
3033 3739
2326 2341
25.5
0.7
16.1
13.5
223
284
651
932
1898 1693
13.1
9.7
420
694
0
237
1479 1236
10.2
7.1
543
415
37
34
935
820
935
584
19.7 ‐37.6
6.5
3.4
FY 14
18279
5.3
16049
6475
3770
1884
3919
2230
‐4.7
12.2
341
1101
1470
8.0
718
0
752
4.1
412
55
340
340
‐41.8
1.9
FY 15E FY 16E
21320 25935
16.6
21.6
18227 21956
7524 9248
4051 4668
2175 2593
4477 5446
3093 3979
38.7
28.7
14.5
15.3
358
376
1219 1242
2233 3114
10.5
12.0
807
618
0
0
1425 2496
6.7
9.6
485
848
34
34
941 1647
941 1647
176.9
75.1
4.4
6.4
Y E March (Rs m)
Share Capital
Reserves & Surplus
Net Worth
Total debt
Net defered tax liability
Total Liabilities
Gross Fixed Assets
Less Depreciation
Capital Work in Progress
Net Fixed Assets
Investments
Current Assets
Inventories
Sundry Debtors
Cash & Bank Balance
Loans & advances
Other Current assets
Current Liabilities & provisions
Net Current Assets
Mis Exp not written off
Total assets
Cash Flow
Key ratios
Y E March (Rs m)
PBT
Adjustment for:
Depreciation
Others
Changes in working capital
Tax expenses
Cash flow from operations
Capital expenditure
Free Cash Flow
Others
Cash flow from investments
Interest
Loans availed or (repaid)
Proceeds from Issue of shares (incl share
premium)
Dividend paid (incl tax)
Cash flow from Financing
Net change in cash
Cash at the beginning of the year
Cash at the end of the year
Other Bank Balances
Cash as per Balance Sheet
Y E March
Adj. EPS (Rs)
Cash EPS (Rs)
BVPS
DPS (Rs)
FY 12
1479
FY 13
1236
FY 14 FY 15E FY 16E
752 1425 2496
651
374
-591
-376
1536
-5173
‐3637
275
‐4898
-402
4467
932
393
-1912
-343
306
-1204
‐898
450
‐755
-673
1410
1101
715
-787
-157
1624
-1925
‐300
39
‐1886
-721
997
1219
807
-756
-485
2211
195
2405
0
195
-1219
200
1242
618
-1189
-848
2318
-700
1618
0
‐700
-1242
-2700
0
-191
3873
512
194
706
29
735
0
-229
508
60
706
766
54
820
0
-231
45
-217
766
549
54
603
0
-232
‐1250
1155
549
1704
62
1766
2500
-257
‐1699
-81
1704
1623
71
1695
Source: Company, IndiaNivesh Research
IndiaNivesh Research
HSIL Ltd|First Cut Analysis
FY 12
132
9542
9674
8645
782
19101
15448
3480
3333
15301
111
7368
3059
2440
735
1050
84
3679
3689
0
19101
FY 13
132
10131
10263
10341
1141
21745
19430
4384
622
15668
108
9924
4067
3893
820
1112
32
3955
5969
0
21745
FY 14
132
10151
10283
11330
1154
22767
20704
5510
1195
16388
109
10245
4443
4192
603
968
39
3975
6270
0
22767
FY 15E
132
10860
10992
11530
1154
23676
21504
6554
200
15150
109
12787
5117
4690
1766
1173
41
4369
8417
0
23676
FY 16E
146
14736
14882
8830
1154
24866
21904
7794
500
14610
109
14653
5965
5446
1695
1504
43
4506
10147
0
24866
FY 12 FY 13
14.2
8.8
24.0 26.5
146.5 155.4
3.0
3.0
FY 14
5.1
21.8
155.7
3.0
FY 15E
14.2
32.7
166.4
3.0
FY 16E
22.5
39.5
203.3
3.0
Adj. P/E (x)
P/CEPS (x)
P/BV (x)
EV/EBITDA(x)
M cap/sales (x)
29.1
17.2
2.8
50.2
1.9
46.6
15.5
2.7
50.6
1.6
80.1
18.9
2.6
53.6
1.5
28.9
12.6
2.5
38.4
1.3
18.3
10.4
2.0
32.1
1.2
ROCE
ROE
13.1
11.4
8.7
8.2
7.0
3.3
10.1
8.8
13.5
12.7
Inventory (days)
Debtors (days)
Trade Payables (days)
66.7
51.5
26.2
74.9
66.5
29.8
85.0
80.7
31.2
81.8
76.0
29.3
78.0
71.3
29.9
Total Asset Turnover (x)
0.8
0.7
0.7
0.8
0.9
Fixed Asset Turnover (x)
1.2
1.1
1.1
1.4
1.7
Debt/equity (x)
Debt/ebitda (x)
Interest Coverage (x)
Dividend Yield %
0.9
3.7
4.5
0.7
1.0
4.4
2.4
0.7
1.1
5.1
2.0
0.7
1.0
3.7
2.8
0.7
0.6
2.2
5.0
0.7
January 16, 2015 | 3
First Cut Analysis (contd...)
Disclaimer: This document has been prepared by IndiaNivesh Securities Private Limited (“INSPL”), for use by the recipient as information only and is not for circulation or public distribution. INSPL includes
subsidiaries, group and associate companies, promoters, employees and affiliates. INSPL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered
to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSPL independently and cannot be guaranteed. The third party research material included
in this document does not represent the views of INSPL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in
accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied,
redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSPL. This document is solely for information purpose
and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future
performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSPL does not take responsibility
thereof. The research analysts of INSPL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based
on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not
match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or
appropriate to recipients’ specific circumstances. INSPL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein
or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change
without any notice. INSPL directors/employees and its clients may have holdings in the stocks mentioned in the document.
This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis report
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report
accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations
or views expressed in this report: Daljeet S Kohli, Amar Maurya, Abhishek Jain, Yogesh Hotwani, Prerna Jhunjhunwala, Kaushal Patel, Rahul Koli, Tushar Manudhane & Dharmesh Kant.
Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:
Disclosure of Interest Statement
1. Details of business activity of IndiaNivesh Securities Private Limited (INSPL)
INSPL is a Stock Broker registered with BSE, NSE and MCX - SX in all the major segments viz. Cash, F & O and
CDS segments. INSPL is also a Depository Participant and registered with both Depository viz. CDSL and NSDL.
Further, INSPL is a Registered Portfolio Manager and is registered with SEBI.
2. Details of Disciplinary History of INSPL
No disciplinary action is / was running / initiated against INSPL
3. Details of Associates of INSPL
Please refer to the important 'Stock Holding Disclosure' report on the IndiaNivesh website (investment
Research Section - http://www.indianivesh.in/Research/Holding_Disclosure.aspx?id=10- link).
Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks.
INSPL and its affiliates may have investment positions in the stocks recommended in this report.
4. Research analyst or INSPL or its relatives'/associates' financial interest in the subject
No (except to the extent of shares held by Research analyst or INSPL or its relatives'/associates')
company and nature of such financial interest
5. Research analyst or INSPL or its relatives'/associates' actual/beneficial ownership of 1% or more
Please refer to the important 'Stock Holding Disclosure' report on the IndiaNivesh website (investment
in securities of the subject company, at the end of the month immediately preceding the date
Research Section - http://www.indianivesh.in/Research/Holding_Disclosure.aspx?id=10- link).
of publication of the document.
Also, please refer to the latest update on respective stocks for the disclosure status in respect of those
stocks. INSPL and its affiliates may have investment positions in the stocks recommended in this report.
6. Research analyst or INSPL or its relatives'/associates' any other material conflict of interest
at the time of publication of the document
No
7. Has research analyst or INSPL or its associates received any compensation from the subject
company in the past 12 months
No
8. Has research analyst or INSPL or its associates managed or co-managed public offering of
securities for the subject company in the past 12 months
No
9. Has research analyst or INSPL or its associates received any compensation for investment banking
or merchant banking or brokerage services from the subject company in the past 12 months
No
10. Has research analyst or INSPL or its associates received any compensation for products or services
other than investment banking or merchant banking or brokerage services from the subject
company in the past 12 months
No
11. Has research analyst or INSPL or its associates received any compensation or other benefits
from the subject company or third party in connection with the document.
No
12. Has research analyst served as an officer, director or employee of the subject company
No
13. Has research analyst or INSPL engaged in market making activity for the subject company
No
14. Other disclosures
No
INSPL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed
herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law,
without any prior notice. INSPL reserves the right to make modifications and alternations to this statement, as may be required, from time to time.
Definitions of ratings
BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
HOLD. We expect this stock to deliver -15% to +15% returns over the next 12 months.
SELL. We expect this stock to deliver <-15% returns over the next 12 months.
Our target prices are on a 12-month horizon basis.
Other definitions
NR = Not Rated. The investment rating and target price, if any, have been arrived at due to certain circumstances not in control of INSPL
CS = Coverage Suspended. INSPL has suspended coverage of this company.
UR=Under Review. Such e invest review happens when any developments have already occurred or likely to occur in target company & INSPL analyst is waiting for some more information to draw conclusion on
rating/target.
NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.
Research Analyst has not served as an officer, director or employee of Subject Company
One year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose name of
company in the list browse companies and select 1 year in icon YTD in the price chart)
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007.
Tel: (022) 66188800 / Fax: (022) 66188899
e-mail: research@indianivesh.in | Website: www.indianivesh.in
Home
IndiaNivesh Research
HSIL Ltd|First Cut Analysis
January 16, 2015 | 4
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.