Buy Hercules Hoists; target of Rs 322: Firstcall Research

“Hercules Hoists, a part of the Bajaj group, one of the India’s prime business houses was established in 1962 is a manufacturer of material-handling equipment. It has a diverse product range that encompasses chain pulley blocks, electric hoists, cranes, etc. that fulfills the storage, retrieval and material handling needs of companies around the world. The ISO 9001:2000 certified company offers products including chain pulley blocks, wire rope hoists, trolleys, chain electric hoists, EOT/HOT cranes, light profile crane systems, stacker cranes, lever hoists, winches and roll out racks. It has a modern manufacturing facility in Mumbai equipped with an up-to-date machine shop and rows of assembly lines and testing equipment. HHL has set up a sprawling factory at Mulund, Mumbai where it manufactures its range of products. It utilizes a state-of-the-art machine shop, ultra modern assembly lines and accurate testing equipment. With a workforce of over one hundred workmen and 87 staff comprising officers and engineers, the company enforces strict quality control at every stage of the manufacturing process - right from selection of raw material to the inspection of the finished product.”

“The company sells its products under the brand name Indef. The whole range of INDEF material handling equipment manufactured by Hercules Hoists Limited. The marketing division has a network of 45 authorized marketing associates, 100 dealers, service agents and liaison agents across India. It has appointed business facilitators at several strategic locations to facilitate business transactions and to estimate customer application needs. The client list includes state electricity boards like MESB and BSES; automobile majors like Telco and Mahindra & Mahindra; steel plants like Bokaro and TISCO; and cement companies like L&T and ACC and several others.”

“Hercules Hoists Ltd. has reported net profit of Rs 72.64 million for the quarter ended on December 31, 2011 as against Rs. 57.05 million in the same quarter last year, an increase of 27.33%. It has reported net sales of Rs 297.11 million for the quarter ended on December 31, 2011 as against Rs 275.23 million in the same quarter last year, a rise of 7.95%. Total income grew by 12.38% to Rs 315.26 million from Rs. 280.52 million in the same quarter last year. During the quarter, it reported earnings of Rs 4.54 a share.”

“At the current market price of Rs.285.25, the stock is trading at 13.85 x FY12E and 12.45 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs. 20.60 and Rs. 22.91 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 29% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 9.31 x for FY12E and 8.43 x for FY13E. Price to Book Value of the stock is expected to be at 3.12 x and 2.49 x respectively for FY12E and FY13E. 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 322 for medium to long term investment,” says Firstcall Research report.  

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