Buy Honda Siel: Parag Parikh Financial Advisory Services

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Buy Honda Siel: Parag Parikh Financial Advisory Services

Parag Parikh Financial Advisory Services is bullish on Honda Siel Power Products and has recommended buy rating on the stock in its May 20, 2011 research report.

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Parag Parikh Financial Advisory Services is bullish on Honda Siel Power Products and has recommended buy rating on the stock in its May 20, 2011 research report.

"Honda Siel Power Products (HSPP) came out with an unimpressive set of numbers for the quarter ended March 2011. On a quarterly y-o-y basis, Net Sales were about flat at Rs 964 Million while bottom line took a big hit. With the all the inflationary pressures in the economy, one would have expected this due to rising input costs. However Raw Material costs have gone up by only about 3.5%. It was Employee costs and Other Expenses that went up by 31.5% and 29% respectively. As a result, Operating Profits came down by 67% from Rs 145.3 Million in Q4FY10 toRs 47.5 Million now. It is unclear as to what specific items within Other Expenses have led to this cost rise. Since the Company does not give this information quarterly, one will have to wait for the Annual Report to understand further."

"PAT stood at Rs 34.1 Million, lower by 65.7% while EPS was Rs 3.4. On an annual basis though, it has been a decent year. The Company had a second consecutive year of over 30% topline growth. Sales were reported at Rs 4,100.2 Million against Rs 3,084.1 Million for FY10. Operating margins were dented due to an increase in Other Expenses. Operating Profits stood at Rs 421.7 Million against Rs 383.6 Million for FY10, up by 9.9%. PAT stood at Rs 296.6 Million. This seems much higher than the FY10 PAT of Rs126.9 Million. It is due to an Exceptional item in FY10. EPS stood at Rs 29.3 for the year. After a series of years of stagnant payouts, HSPP has almost doubled its dividends from Rs 4 to Rs 7.5 this year."

"The Company continues to sit on a huge stockpile of cash i.e. Rs 959.7 Million as of FY11 end. At the CMP of Rs 395.15, the stock trades at a PE (TTM) of 13.5 times. The rationale for the Company continues to remain strong (parent expertise, brand reputation, trend towards farm mechanization, strong financials). We continue to recommend a 'Buy'," says Parag Parikh Financial Advisory Services research report.

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