Buy Hitachi Home; target of Rs 212: Angel Broking

“Hitachi Home & Life Science Solutions (HHLS) reported disappointing 2QFY2012 results. The company’s revenue declined marginally by 2.1% yoy to Rs 128cr in 2QFY2012. On the profitability front, the company reported a loss of Rs 7cr (includes forex loss of Rs 7.8cr) in 2QFY2012 as compared to a profit of Rs 5cr in 2QFY2011. We maintain our FY2013E earnings estimates at Rs 41cr while EBITDA margins are expected to improve from 7.4% in FY2011 to 7.8% in FY2013E due to better operating leverage.”

“Net sales declined by 2.1% yoy to Rs 128cr. EBITDA margin came in at 1.6% in 2QFY2012, down 705bp yoy from 8.7% in 2QFY2011, on the back of higher other expenses and employee expenses. On the bottom-line front, the company reported a loss of Rs 7cr mainly due to forex loss of Rs 7.8cr on ECB.”

“We expect HHLS to post a 15% CAGR growth over FY2011-13E, aided by a 14.7% CAGR volume growth for the same period due to increasing per capita income. Copper prices have seen a decline of ~20% in the past six months, which will lead to increased margins going ahead. PAT is expected to grow at a CAGR of 17.6% over FY2011-13E to Rs 41cr in FY2013E. At Rs 165, HHLS is trading at 9.3x FY2013E earnings and P/B of 1.7x for FY2013E. We maintain our Buy recommendation on the stock with a target price of Rs 212, based on a target PE of 12x for FY2013E,” says Angel Broking research report. 

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