Results of Hyderabad Industries a letdown: Sharekhan

2117 Investors following Everest Ind. Share this News with them.

0

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

Results of Hyderabad Industries a letdown: Sharekhan

Lots of interesting stocks have been flying for the last two weeks or so, individual stocks. Hyderabad Industries is one of those stocks, which picked up both on volumes and price movement.Ajit Motwani of Sharekhan says that the results of Hyderabad Industries were a letdown.He is positive on Sea Marine Drivers which saw net Sales up 91%

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » RELATED NEWS Shipping Corporation sinks Firm freight rates fuel earnings for shipping cos ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Great Eastern Shipping Company | Hyderabad Industries | Seamec | Visaka Industries |

Lots of interesting stocks have been flying for the last two weeks or so. Hyderabad Industries is one of those individual stocks which picked up both on volumes and price movements.

Ajit Motwani of Sharekhan says that the results of Hyderabad Industries were a letdown but he is positive on Sea Marine Drivers which saw net sales up 91%.

Excerpts from CNBC-TV18's exclusive interview with Ajit Motwani:

Q: What did you think about the results of Hyderabad Industries because they displeased a few investors and that did not go down very well?

A: The results were quite a let down because primarily if you see the topline growth for the quarter it was only 15% even though the company has commissioned a new plant at Satharia. The new plant was kind of unstable, so there were lot of quality problems.There were lot of rejections which caused a production problem at the plant. So there was a huge drop in operating margins; they came down to 3% from 17% primarily because of production problems and also a 10% point increase in cement cost.

Q: You still have a buy on that stock, do you think this is a temporary blip then and do you expect the next few quarter's numbers to be stronger, what gives you that confidence?

A: As soon as results came we went back to our channels, which primarily stated that the issues of quality has been sorted out and the volumes are back. The thing that has helped stabilised the volume is the Charminar brand that Hyderabad has which is the number one brand in market with around 24% market share.

The industry is doing well with 24% volume growth. The production at the plant has stabilised and from now onwards when this construction season starts up, all the traders have the feeling that the company will pass through the cement price hike.

They have been given an intimation of 7% hike from November and going forward they are setting up two new sheeting plants, which will almost double their capacity and also there is a plan of setting up an Aerocon Block plant. So overall good sanguine industry outlook and Rs 100 crore capex, the stock is available at five times the 2008 earnings and that gives us confidence.

Q: Who would you include as its listed peers and on what basis? How does it compare to the rest?

A: Among the comparables, there is Visaka Industries and Everest Industries . On a comparative basis it is at par with them as of now but we overall believe that the industry itself is due for a re-rating given the kind of strong re-rating, it is around 20-25% for the year till date.

Q: SEA Marine is the other stock which you like at your brokerage, what is the price target you've got on that one and how does it stalk up in terms of valuations?

A: We have a price target of around Rs 270. If you look at the broad story there is huge exploration in production capex that is lined up over next 5 years and primarily because of that the rates for the offshore assets have gone up. SEAMAC is basically into chartering of multi-support vessels which are used for underwater construction works and it is adding new vessels.

Even for the existing vessel the charter rates have gone up from USD 25,000 per day to USD 45,000. As on valuation, it is trading around 6 times 07 earnings which is attractive and there is a strong case of re-rating because in a couple of months you will have GE Offshore which is one of the closest player for comparison getting listed.

The implied value that people have assigned for GE Offshore and the price for GE Shipping was around 12 to 15 times one year forward, so there is a strong case of re-rating there. So that is why we are pretty bullish on the stock with price target of around Rs 270.

Q: Any disclosures?

A: We might be holding some of the stock in our portfolios.