Buy Hanung Toys; target of Rs 246: Firstcall Research

“Hanung Toys & Textiles (HTTL) was set up in the year 1990 in collaboration with a South Korean Company. It is a name to be reckoned internationally in the field of Soft Toys and Home Furnishings. In India, it has the distinction of being the leading manufacturer and exporter of Soft Toys and one of the leading manufacturers and exporters of Home Furnishings. The company is the licensee of Walt Disney characters for soft toys in the country. HTTL's pioneering efforts on the shaped cushions have revolutionized the market, both domestic and international.”

“Hanung Toys reported a phenomenal rise in standalone net profit for the quarter ended Dec 2010. During the quarter, the profit of the company increased 35.05% to Rs 311.68 million from Rs 230.79 million in the same quarter last year. Net sales for the quarter rose 31.73% to Rs 2825.26 million, while total income for the quarter rose 31.37% to Rs 2872.46 million, when compared with the prior year period. It reported earnings of Rs 12.37 a share during the quarter, registering 31.37% rise over prior year period.”

“Company has acquired a controlling stake in M/s Cody Direct Corp, a company incorporated under the US laws. Cody Direct is an 18 years Home Furnishing Marketing and Distribution. Cody Direct has 55 Avenue showrooms in New York. The acquisition completely synergies with Hanung’s business and its growth strategies. Hanung has long desired to enter the US market in an aggressive and cutting edge manner.”

“Net Sales and PAT of the company are expected to grow at a CAGR of 27% and 35% over 2009 to 2012E respectively. Price to Book Value of the stock is expected to be at 1.03 x and 0.79 x respectively for FY11E and FY12E. Earning per share (EPS) of the company for the earnings for FY11E and FY12E is seen at Rs.50.19 and Rs.62.61 respectively. On the basis of EV/EBITDA, the stock trades at 2.38 x for FY11E and 1.99 x for FY12E. At the current market price of Rs.214.10, the stock is trading at 4.27 x FY11E and 3.42 x FY12E respectively. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 246 for medium to long term investment,” says Firstcall Research report.

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