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HSIL Investment Snapshot :- Slide #3 Indian Sanitary ware Market An Overview :- Slide #5 Container Glass Segment An Overview :- Slide #9 HSIL Business Overview :- Slide #13 Investment Rationale :- Slide #23 HSIL Financials:- Slide #31 Conclusion :- Slide #37
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HSIL was incorporated as Hindustan Twyfords Ltd in 1960 by Somany family (Promoters) in collaboration with Twyfords Ltd, UK to introduce vitreous China ceramic sanitary ware in India. AGI Glaspac, glass division of HSIL was acquired by the company in 1981 through a state government sale and it turned a loss making company into a profitable and healthy venture through various changes at both the operational and organizational levels. Thus, HSIL now has two business units of sanitary ware and container glass contributing almost equally to its revenues and positioned firmly in both the segments through its long standing experience. HSILs sanitary ware brand Hindware is the market leader and has acquired a strong mind space of the customer. It has been voted as a super brand continuously for the past 5 years. HSIL has a pan Indian presence in the sanitary ware segment and a dominating share of South Indian market in the container glass segment. HSIL has built a strong moat through extensive distribution network, strong clientele and low cost manufacturing presence across its two business divisions.
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The total housing shortage in India is huge at over 35 Million units and hence there is a strong structural story for the growth of new housing units thus signaling demand for sanitary ware and other bathroom products. The average growth of new housing is expected to be around 16 % CAGR for the next 3-5 years. Indias sanitation coverage compared with even our poorer neighbors is low and hence the scope for increasing coverage will act a growth catalyst for the sanitary ware manufacturers in India. Commercial segment though now is weak considering the high interest rate and costly real estate, it will pick up in the coming years through the construction of new malls, office spaces, IT Parks, SEZs etc. Sanitary ware industry is a wonderful proxy play on the growing construction demand.
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Sanitary ware market world over is a very brand conscious product and is dominated by a few players who have strong brands and distribution networks. Even in India, sanitary ware segment is dominated by the top 3 players who account for more than 95 % of the organized market. Indian sanitary ware players have constantly increased their market shares over the last decade as consolidation forced several smaller players to move out as the business requires size and scale to compete across various price points and across different products. Replacement demand which has been very low in the Indian markets has started to pick up on the wake of changing social trends like, people re-furnishing their bathrooms during big events like childrens marriage and also younger generation replacing their sanitary ware of their ancestral homes.
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Indian packaging industry is a 14 Bn $ industry and is growing at ~ 15 % for the past few years and in that Glass packaging industry is growing at a rate of ~ 12 % and is more than a billion dollar industry. Glass has been growing slower than the industry because of the high costs involved in production when compared with other packaging and also because of the lack of flexibility like plastics. But Glass has maintained its status as a premium packaging material and is also environmental friendly because of its capacity to get recycled and it does not get adulterated with chemicals like the other packaging materials. Glass is inert and safe and more importantly has a better emotional connect with the customers than other packaging materials like cans and PETs.
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Indias per capita consumption of glass is one of the lowest amongst all countries at 1.4 Kgs per person and the
glass consumption has a direct co-relation with the growth of its end industries.
If we believe in the Indian consumption story and the fact that Indians will get affluent over the next decade and start consuming more liquor, soft drinks etc, there is a huge scope for growth. Even if we assume 5 times the glass consumption per capita as of now, to be reached in the next decade, it would require huge production of glass. Scope of the opportunity is pretty huge and the entire glass production in this country is concentrated amongst the top 3-4 players and the main moat is the capital intensity in setting up a glass plant.
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Glass is a regional industry and its economic viability depends on the distance of the service industries. A glass plant will be able to service industries within 700 Sq. Km of its presence thus rates depend upon the local demand supply and discourages captive glass plants as most industries dont have the volumes at one location to justify captives.
Main deterrent for entrants is the capital intensity of manufacturing glass as any furnace which produces less than 400 tonne per day (tpd) is not viable and the cost involved will be greater than 350 Cr. But a Brownfield expansion can produce the same capacity at a much lower cost of around 200-250 Crs. Thus giving the incumbents a huge advantage and that is one of the main reason for consolidation in the industry and the presence of few large players across India. Since it takes more than 2 years to put up a glass plant, it is not difficult to analyze the demand- supply equation and from the present capacities, it is said that the demand will exceed supply for at least the next 2-3 years. This gives the companies better pricing power and it can seen from the rate revisions happening with a smaller lag than before depending upon the increase in cost of manufacturing thus allowing glass manufacturers to maintain margins over a period of time. Glass industry is also moving towards more clean and better designed glasses as liquor and soft drink manufacturers start looking at glass packaging as a source to attract customers and maintain competitive advantage. At present, very high end glass bottles are being imported but since volumes are picking up, local glass manufacturers are also starting to produce these high value bottles thus improving their average realizations. At present, the three major varieties of glass which are manufactured are flint, umber and green glass. The main growth drivers of glass consumption in its end industries are increasing disposable incomes, low per capita consumption of liquor, increasing social acceptability to drinking, changing lifestyles, penetration of soft drinks in rural markets and increased acceptance of pharma products.
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Key Highlights
Strong Moats
HSIL has strong moats in the building products division through its well entrenched brands and in the container glass segment through the strategic location of low cost manufacturing plants.
Capable Management
HSIL is promoted by Somany family who have a great understanding of the business through their long association in the industry. They have also reached their previous guidance's which gives us comfort for its execution of future plans
Product Expansion
HSIL s has leveraged its brand and distribution network in building products division to introduce a wide variety of products. Even in Glass division, HSIL has been introducing bottles with higher EBIDTA margins.
HSIL
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Strong Brands
Volume Pyramid Brand Kermag ( Tie-up with Sanitec) Hindware Art + Hindware Italian Collection Hindware Raasi Bene Lave ( Premium Faucet Brand ) Price Point (Rs) 10,000 75,000 5,000 2,00,000 300 - 5300 200 - 350 2,000 Onwards
HSIL is the only sanitary ware player with various brands straddling across the entire market pyramid from low end to premium segment. HSILs brands through its aggressive marketing has a strong top off the mind recall and is usually associated with quality products which people aspire for. HSILs brand management has been excellent which can be seen from the creation of sub-brands of Art and Italian collection from the mother brand of Hindware, 5 years ago. HSIL also has introduced premium faucets under the brand name of Bene Lave without affecting the perception of the existing brands. HSILs focused marketing and gradual shift to the high end segment can be seen from the fact that, in Q1-FY 12, more than 54 % of its sales were from the Art and Italian Collection brands thus giving it better margins. HSILs brands in the premium segment has been very well received in the market as it is at a very competitive price.
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HSIL has implemented ERP and a strong IT platform amongst its distribution network to keep track of the market and hence work efficiently depending upon the demand for various products. HSIL has been active to build the brand amongst the plumbing community who have a great influence in buying of sanitary ware through better interactions and providing them good service. HSILs strong network of service centers addresses service calls within 48 hours through its focused after-sales service professionals. HSIL plans to strengthen its distribution network by addition of over 400 distributors and 3000 retailers in the next 2 years and thus covering each and every town in India with a population of over 25,000 people. This strong network of distribution is difficult to replicate and helps in increasing its market share.
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Nos
33
Location
All India
Details
Exclusive to HSIL (600-1500 Sq.ft)
Future Plans
To open 10 boutiques each in 3 years To open 8 arcades in 3 years To open 2 stores every year To open 4-5 stores annually and expand foot print. 35 Cr investment has been planned To open 30 stores in 3 years
Store-Type
Selling Point
Ownership
Dealer owned but maintained by HSIL. Special dealer discounts for boutiques. Dealer Owned but maintained by HSIL Company owned exclusive showrooms for brand display HSIL owned through subsidiary
Display center + Selling Point Display centers Large Format Home Retail with over 9000 SKUs
EVOK
Over 10000 Sq.ft retail stores selling home furnishing, lighting, flooring, bath & kitchen products 200-500 Sq.ft, shops within showrooms for exclusive display of HSIL products
Shop in shop
80
All India
Selling Point
Dealer Owned
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HSILs strong distribution and retail presence has enabled it to expand into other building products other than sanitary ware like wellness products and modular kitchens. HSIL has concentrated into expanding product portfolio where the margins are higher and it has competitive advantages. HSILs retail presence gives it a better brand experience amongst the users and helps mainly in getting large institutional customers away from foreign brands like Kohler and TOTO. EVOK, retail subsidiary of HSIL has been doing pretty well and except for one store it has become EBIDTA positive in all its stores and is in an expansion mode. EVOK provides all the products required to furnish and decorate your bare constructed house though its wide range of SKUs. EVOK though now produces 8-9 Cr losses on PAT level, is an important strategic initiative which along with its other retail formats will allow HSIL to sell high end products and leverage its brand positively, thus creating a sustainable competitive advantage. Retail presence helps in gauging the demand for various products and HSIL also has a well established trading business in building products where it imports from outsourced manufacturers and sells through its distribution networks items like high end tiles, shower rooms etc. HSIL faucet manufacturing plants are being set-up only after the trading of faucets has been able to generate enough volumes for the plant to become viable. The strength of HSIL can be seen from the fact that it has able to scale up the faucet business at a rapid pace and aims to be the number 2 player in the business within next year. HSILs brand strengthening and retail presence can be compared to TTK Prestige which used its brand and Prestige Stores retail format to morph from a cooker manufacturer to covering all kitchen related products thus growing profitably at a rapid pace like HSILs transformation from sanitary ware to total bathroom solutions.
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Faucet Production
HSILs existing manufacturing plants are at strategic locations with clear linkages to raw materials, like the Haryana sanitary ware plant which sources raw materials from the mines of Rajasthan and Gujarat. In container glass segment, the main reason for the good performance of HSIL over competitors is its two manufacturing plants in AP which is by far the biggest market for liquor and soft drinks even on a per capital basis and is growing at over 20 % CAGR compared with the all India growth rate of 12-14 %. HSILs furnaces has been de-bottlenecked and hence operating at great efficiency and there is no need for any furnace shutdown for maintenance purpose in the next 3 years. Its Bhongir plant is a dual fuel furnace and can operate on both natural gas and LSHS/ FO. HSILs low cost manufacturing operations helps it in better margins over its competitors in both segments. Though, Parry-Roca has higher manufacturing capacity than HSIL its market share is less than HSIL, showing the efficient management of its manufacturing facilities.
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Revenue
Food Products 26% Beverages 21% Beer 38%
Beer 43%
Pharma 14%
Pharma 15%
AGI Glaspac has a wide range of customers across various industries helping it to take advantage of the growing demand for glass bottles in the south India. HSIL is also foraying into high end specialty glasses which have 8 % higher margin than the ordinary bottles thus expanding its profits. HSIL has recently acquired Garden Polymers which is into packaging using PET bottles, caps and closures for about 89 Crs. This acquisition will enable it to provide a wide range of packaging solutions to its customers and also leverage its strength to grow the business of Garden Polymers at 30-40 % CAGR. Garden Polymers is already a profitable company with a revenue of 104 Cr, EBIDTA of 22 Cr and PAT of 10.4 Cr for FY-11. Thus, the acquisition will be EPS positive for HSIL and gives a boost to the growth of packaging division through a new form of packaging. HSILs glass division has seen improving realizations due to better product mix, cost efficiencies and lower lag in price revision from large customers and we expect the supply demand situation which is the main reason for stable margins, to stay for at least the next 2-3 years.
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Hotels
Taj Hotels Group ITC Hotels The Park Hotels Group Grand International Hotels Hyatt Hotels
Pharma Beverages
Corporates
Larsen & Tourbo Infosys Technologies Bengal Ambuja The Prestige Group Everest Group
Foods
Hindustan Unilever GSK Consumer Dabur Healthcare Priya Foods Global Green
It can be seen from above that HSIL has a very strong customer portfolio in all its segments of business and it has
been only growing over the years, showing the quality of HSILs products and its services. At present the sales between Institutions: Retail in sanitary ware is 25: 75 and HSIL aims to maintain it going forward as Institutions give better volumes and retail sales have better margins. In Glass business, requirements are given by customers before-hand and pricing is variable on cost pressures.
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Barwood Products :
Inorganic Growth
HSIL acquired Barwood products in June, 2010 which is a small boutique manufacturer of specialized bathroom ceramics in UK and other European countries. HSIL paid 1 million pounds for the company which had revenues of about 2 million pounds. This acquisition gives HSIL the much needed distribution strength and entry into the European markets which have much higher realizations than Indian markets. HSIL targets to grow the revenues of Barwood from the current 2 million pounds to about 8-10 million pounds in the next 4 years through introducing more products. Considering the turmoil in European markets, this might be a aggressive target.
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Investment Rationale
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Wellness Products
Bath Tubs Shower Panels Shower Enclosures Whirlpools Concealed Cisterns
Accessories
PVC Cisterns Fittings/ Seat Covers High End Tiles
HSIL has leveraged its brand and distribution strength to venture into several allied products and now morphed into a total bathroom solutions provider. The moat of brand and distribution is difficult to build for any new player. At present, nearly 77 % of building products revenues comes from sanitary ware, 18 % from faucets and other allied products constitute the remaining. If HSIL, is able to scale up the wellness products and Kitchen appliances, which have huge potential then % of revenues from sanitary ware will come down. Once the volumes pick up, HSIL will put up its own manufacturing plant for high end ceramics and usually the margins of outsourced products are at least 4-5 % lower than own manufacturing. HSIL is well positioned to capture profitably the strong Industry trends of higher discretionary spending for bathrooms and changing social mindset.
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Sanitary ware
Incremental Type Capacity 0.2 Mn Pieces 2.5 Mn Pieces Incremental Capacity 425 tpd Brownfield Greenfield Type
Faucets Faucets
Bhiwadi, Rajasthan (Crabtree Acquisition) Bhiwadi, Rajasthan ( Near the old plant ) Manufacturing Location
Container Glass
Bhongir, AP
Brownfield
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HSILs planned capacity addition in container glass segment of 425 tpd will increase its capacity significantly but considering the fact that market has been growing at over 14 % and only HNG is putting up a glass plant in South India, we expect the plant to operate at good utilization ratios. HSIL has also acquired gas connection for its AP plant from one of the city gas distributors and expects the gas supply to start before the end of this year. This alone could fetch HSIL nearly 6-10 Crs of additional profits each year which is a significant improvement. Considering all the happenings in the company and taking the demand situation into account, we feel that HSIL will be able to maintain its margins for the next 2-3 years. We are not factoring in any huge changes in the interest rate scenario.
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Consistent Growth
Revenues In Cr Rs 576 2008 666 2009 851 1050
HSIL has seen consistent growth for the past 4 years in all parameters and is set for another cycle of growth through increased capacity.
2010
2011 87.35
One of the major plusses of this growth has been the improving margins in both the business. Bottom line has significantly outperformed top line growth. EPS has grown well in spite of taking equity dilution into consideration. Main reasons for the improvement in margins are improved product mix, higher average realizations, cost efficiencies and increased capacity utilization. Except for the dip in capacity utilization, all the other margin levers are only expected to get strengthened going forward. HSIL in spite of volume growth of just under 12 % , has been able to generate value growth of over 30 % in sanitary ware industry and similarly in container glass also value growth has outperformed volume growth by over 5 % which indicates the strength of the underlying business model.
2010
2011 14.09
2011
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HSILs implementation of CAPEX is spread as 180 Crs in 2012, 245 Crs in 2013 and 75 Crs in 2014. This phased implementation of cash outflow will allow the balance sheet to expand without any strain. HSIL has a land in Hyderabad which doesnt currently house any manufacturing plant and is available for monetization. The value of the land is estimated to be about 100-150 Crs. HSIL can fund all its expansion plans without diluting any equity and dilution may happen only if the company acquires a very large asset, possibility of which is less. Even in case of acquisition, company has said that it will be ready to sell the land to fund it. HSIL cash generation is very healthy and since the depreciation of glass plants is pretty high, the cash profits will be much more than the reported PAT in the next 3 years.
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Jaguar which is the largest player in Faucet segment with more than 45 % market share of the 3000 Cr market is aggressively expanding into sanitary ware segment leveraging its brand and distribution strength. A significant disadvantage for Jaguar is the lack of manufacturing capacity, in spite of which it will carve a part of growing market. But, sanitary ware segment has been a tough business and there has been a lot of consolidation over the years and hence it is difficult for new players to scale up. Bigger building product players like HR & Johnson, Kajaria and Somany Ceramics have tried to enter this market for the past few years but unable to get hold as sanitary ware is a much more brand conscious market when compared to other building products. It is also difficult to compete in the market without a wide variety of products across different price points and more importantly just by importing outsourced products without manufacturing them or having a strong sales and service team. It can be seen from the fact that Kohler in spite of being in the market for over 10 years has been unable to scale up and has just 108 distributors and it concentrates on just the top end of the market. Thus penetrating this market is tough and incumbents have a strong moat, thus fending off new players like Jaguar.
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Container glass industry like sanitary ware industry is a concentrated industry and dominated by a handful of players indicating huge competitive advantages for the incumbents and market leaders taking full advantage of the growth in the industry profitably. Market leader HNG which has 55 % market share of organized market is expanding capacity in South India by putting up a 650 tpd plant in Naidupet, Andhra Pradesh. Considering the volume growth in the South Indian markets and no capacity addition except for the two players, absorption of the increased capacity will not be a problem and the demand- supply situation will be in favor of glass manufacturers. Brownfield expansions usually have a Revenue/ Capital invested ratio of around 1.2 compared with 0.8 for green field plants, thus creating huge advantages for the incumbent players. HSILs new Greenfield expansion also has provisions for further expanding capacity in the future.
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Financials
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FY 09
615.8 104.2 28.4 16.8 -9.6 49.3 16.7 31.7 5.8 13.4
FY 10
804.2 145.8 50.3 40.2 1.6 56.9 9.1 43.6 7.9 37.6
FY 11
1078.6 206.3 55.4 36.5 3.8 118.2 40 78.3 12.9 63.1
FY 12E FY 13E
1395.2 290.5 74.0 40.5 10.9 187 63.5 123.5 18.7 45 1680.5 370.5 80.0 44.5 14.6 260.6 88.6 172 26 38.6
118.4 13.9
18.3 12.4
165.9 13.7
198.0 17.5
305.5 19.8
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Management Quality
Key Person
R K Somany Sandip Somany Arun Kumar Dukkipati RB Kabra
Designation
Chairman & MD Joint MD President, Container Glass President, Building Products
Background
55 Years of experience & leading HSIL since inception. Active participant in Industry associations. Associated with HSIL since 1985 and director since 1994. He is the driving force behind the organization. Associated with HSIL since 1996 and a qualified mechanical engineer with 39 years of experience. Associated with HSIL since 1981 and is a qualified chartered accountant with 30 years of experience. It can be seen that, Somany family has been leading the glass industry and sanitary ware manufacturing in this country and have very detailed knowledge about the business. HSIL, though a family business has professional people in key positions and a well diversified board with 7 independent directors. Sandip Somany at the age of 48 is well positioned to drive the company through the next decade with his vast experience and industry knowledge.
Other Somany Family firms ( Each independent and no inter relationships between firms ) HNG Cera Sanitary ware Somany Ceramics C K Somany Vikram Somany Indias largest glass manufacturer Indias 3 largest sanitary ware manufacturer Premier Tile manufacturer
Shreekanth Somany
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Investor Support
Share Holding % Promoters FII DII June 2011 51.34 24.14 1.83 Mar 2011 51.34 22.29 3.76 Dec 2010 51.01 21.58 4.13 Sep 2010 60.49 1.14 7.39 June 2010 60.49 0.47 6.44
Notable Investors
HFC Mauritius Royal Bank of Scotland T. Rowe Price International discovery fund
Share Holding %
9.09 3.99 3.60 3.39 2.92 1.78 1.72 1.57 1.04
HSIL has been enjoying good investor support and it can be seen Commonwealth Equity Fund from the fact that its QIP fund raising last year had strong foreign The India Fund Inc investors appetite and easily raised 150 Cr Rs. HSIL has been a consistent dividend paying company and also a very profitable and healthy company, since its inception. Hence it has rewarded its share holders well. HSILs stock performance has been good as investors are starting to recognize its potential and its competitive advantages. Henderson PE has been associated with HSIL since 2005, when it picked up a 14.99 % stake in the company for 12.2 Million $s and the investment has rewarded it well. GMO Emerging Markets Fund Sundaram Mutual Fund Jupiter South Asia Investments California Public Employees Retirement System
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Raising Interest Rates : RBI has been raising interest rates continuously and recently raised 50 bps for a consecutive 11th time since March, 2011 to control the spiraling inflation. This has led to a serious slow down in the economy and especially the real estate sector with new housing projects getting delayed. Raising interest rates will also put more pressure on the earnings due to increased interest costs. Though the raising interest rates will have some negative effects, we have factored in higher interest cost in the earnings projection and it will look better if the interest rate cycle peaks and cost of funding falls. Though, the new housing is delayed there is 12-16 % volume growth for sanitary ware industry on the back of which strong brands like Hindware will grow their value by over 30 %.
Concerns
Demand Slow down: Indian consumption demand though pretty robust on the long term, might slow down
temporarily due to un favorable macro economic scenario. But the key end users of glass industry have been growing robustly in spite of these. This years monsoon has been widely spread with good rainfall across India and this will boost demand in rural areas. More over, the supply in container glass being less than supply should keep the manufacturers steady.
Increasing Cost Pressures: Container glass division is slightly vulnerable to increased soda ash prices. We
believe though, high cost may be a concern companies will be able to pass on the increased costs with a small time lag. Presently, power and fuel consists of 33 % of the production cost in container glass segment and any un favorable changes will affect the company. Margin Concerns : A dip in utilization ratios will create pressure on margins but considering the fact that presently all its capacities are running at greater than 100 % capacity, the utilization ratios will remain stable. HSIL has good margin levers in the forms of moving to high end specialty glass, improved product mix in sanitary ware and reduced dependence of outsourced products. We have considered all these effects and the earnings projection is pretty conservative.
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Attractive Valuations
Parryware was acquired by Roca in 2008, valuing the company at over 1500 Cr Rs from the M-Cap in Price/ Book strong Business group of Murugappa. Company Name Crs Net Sales P/E (TTM) (TTM) Now considering it with the valuation HSIL is getting for its sanitary ware business at about HNG 1754 1685 26.5 1.61 700 Crs, it is definitely cheap in spite of it having Piramal Glass 1054 1252 10 2.26 larger market share than Parry ware and higher growth rates. Cera Sanitary ware 251 255 8.8 2.26 The acquisition also shows the difficulty for a new player even like Roca ( Worlds largest and HSIL 1331 1050 17 2.4 most renowned bathroom brand) to scale up and the need for an acquisition to grow. VIP Industries 2370 759 24.4 10.6 HSIL doesnt have any peer comparison as such, since it is into two business segments. Hence, we have taken companies from both the business segments and also a company on the domestic consumption theme. ( VIP Industries ) Though HSIL like VIP Industries is not a small ticket domestic consumption item, its still a proxy play on the rising affluence of the Indian Middle class and the changing consumption patterns in the country. HSIL is piggy backing on the changing customer preferences to grow profitably. Considering the superior growth rate of HSIL with respect to its competitors, it deserves a premium rating especially when companies like TTK Prestige, Titan, Hawkins etc are quoting at over 30 times P/E.
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Conclusion
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Price chart
HSIL stock price has been on a strong run and the markets have acknowledged the performance of the company in the last two years. Stock has climbed from below 50 levels to 200 in the past 2 years showing the strong buying interest in the counter. But considering the run up in stocks of other similar consumer focused industries, HSIL still has a lot of room to rise and with the increased institutional investors interest in the stock, the buying interest will be strong. Stock is definitely a buy on dips for many investors and hence the downside is pretty much limited.
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HSIL is a one-off company with strong business operations and market leadership in two consumer focused industry segments. There are very few companies which have little competition in their industry segments in spite of the industry showing strong growth trends. Main reason for little competition being strong moats for the incumbents in its businesses. The fact that the companys volumes in sanitary ware segment can improve once the housing scenario improves and the continuous increase in realizations of 6-8 % each year in sanitary ware segment, gives us tremendous confidence in the future of the company. Both the segments have strong and sustainable growth momentum. Though, everyone acknowledges the Indian consumption story and the middle class boom, there are very few companies in the market which can take full advantage of the growth in their sector in a profitable manner by expanding margins, having market leadership and more importantly quoting at a fair price. HSIL has posted strong Q1 results with a PAT of over 28 Crs. Considering the fact that Q1 is the weakest quarter for both its business segments and business improves over the year with the peak quarter being Q4, we can extrapolate the numbers and easily see the company posting nearly 130 Crs of PAT for FY-12. Consolidating Garden Polymers numbers, PAT can be above 140 Crs and at the current M-Cap of around 1300 Crs it is by far one of the cheapest consumption stocks at less than 10 P/E on projected earnings. Considering the projected EPS growth of over 40 % over the next 2 years and sustained business growth of over 25-30 % expected for the next 3-5 years, we expect the company to get re-rated and quote at around 14 P/E which on projected growth comes to over 350 Rs in the next 2 years which is nearly a 75 % return from the current prices. On a conservative basis, even if the company posts 24 Rs EPS in FY-2013 the share can easily rule over 300 Rs which itself is a 50 % return in share capital appreciation in 24 months which is great in this volatile environment. Thus, we feel there is enough margin of safety in the stock investment.
Conclusion
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Mail Id : gokul@hbjcapital.com
Mobile: +91-9994577745
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THANK YOU
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