CRISIL revises Hitech Plast's fair value to Rs 90

627 Investors following Hitech Plast. Share this News with them.

0

Like this story, share it with millions of investors on M3

CRISIL revises Hitech Plast's fair value to Rs 90

CRISIL Research has come out with its report on Hitech Plast. The research firm has maintained the fundamental grade of 3/5 to the company in its February 20, 2012 report.

Post your opinion here

 

0

Tweet

Share on Tumblr

Hitech Plast BSE | NSE 31/05/12 Are Mutual Funds betting on Hitech Plast?

CRISIL Research has come out with its report on Hitech Plast . The research firm has maintained the fundamental grade of 3/5 to the company in its February 20, 2012 report.

Hitech Plast Ltd's (Hitech's) Q3FY12 revenues were broadly in line with CRISIL Research's expectations but operating profitability and PAT were lower than expected. EBITDA margins of both the paints and the non-paint (FMCG and personal care) businesses were low due to lower capacity utilisation. The paints business reported lower sales, and, hence lower capacity utilisation in Q3 due to the seasonal nature of this business. But the non-paint business saw low capacity utilisation due to lower offtake from some of the FMCG clients for whom the company has set up capacities. Also, the company's cost structure is high due to higher overhead costs which are now putting pressure on margins due to lower volumes. While the company has taken various initiatives to control costs, the benefit of the same will come with a lag effect and the performance of this division remains a key monitorable. We have lowered FY12 and FY13 earnings estimates by ~22% to factor in lower margins in the nonpaint business. However, we are confident of the growth in the end-user segment and maintain our fundamental grade of 3/5.

Q3FY12 result analysis (consolidated)
• Consolidated revenue grew by 16.3% y-o-y (down 4.6% q-o-q) to Rs 955 mn. Revenue from the paints business grew by 16.3% y-o-y to Rs 564 mn. It declined by 9.2% q-o-q due to seasonality in sales. The nonpaint business grew by 16.4% y-o-y (3% q-o-q) to Rs 391 mn.

• Consolidated EBITDA margin declined by 245 bps y-o-y to 10.4%, the lowest in the past eight quarters. EBITDA margin of the paints business declined by 87 bps y-o-y (~200 bps q-o-q) to 13.8%. EBITDA margin of the non-paint business declined by 472 bps y-o-y (489 bps q-o-q) to 5.3% since capacity utilisation declined to ~60% due to lower offtake from major FMCG clients. As a result, the non-paint business posted loss at the EBIT level in this quarter.

• The company provided for tax at the rate of 16% in this quarter compared to 36% in Q3FY11 and 26% in Q2FY12 since it had made excess provision in H1FY12. Also, deferred tax asset of Rs 6.7 mn was booked in this quarter due to losses in the subsidiary. The 9MFY12 tax rate was 26% vs. tax rate of 29% in 9MFY11.

• PAT margin declined by 120 bps y-o-y (209 bps q-o-q) to 1.8% due to lower EBITDA margin. EPS was Rs 1.3, down 30% y-o-y and 56% q-o-q.

Valuations: Current market price has strong upside
We continue to use the discounted cash flow method to value Hitech and revise the fair value to Rs 90 per share from Rs 109 earlier. Based on the current market price of Rs 70, we retain the valuation grade of 5/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"