Feb 04, 2012, 01.58 PM IST | Source: Moneycontrol.com

Hold Hind National Glass, target of Rs 175: Unicon Invest

Unicon Investment has recommended hold rating on Hindusthan National Glass and Industries (HNG) with a target price of Rs 175, in its January 31, 2012 research report.

Unicon Investment has recommended hold rating on Hindusthan National Glass and Industries (HNG) with a target price of Rs 175, in its January 31, 2012 research report.

Hindusthan National Glass and Industries Ltd (HNG) posted its Q3FY12 results which were disappointing on the margins front. Revenue posted by the company stood at INR 5114 mn up 27.1% YoY and 21.2% QoQ. The growth in the top line was due to an increase in production volume by 20% as compared to Q3FY11, on account of increased capacities from the rebuilt furnaces. Sales volume was up 15.1% YoY. The realization increased by 10.7% in the quarter due to price hike taken in Q4FY11.

EBITDA for the quarter stood at INR 758 mn, an increase of 1.3% YoY and 8.6% QoQ respectively. The EBITDA margin slipped by 377 bps YoY and 172 bps QoQ and stood at 14.8% for this quarter. The fall in margins was on account of increase in the cost of production per ton which increased by 16.9% YoY. Power and Fuel costs which accounts for ~40% of the total expenses in the quarter increased by ~38% YoY PAT recorded was INR 174.5 mn, a decrease of 44.4% YoY and a marginal increase of 4.1% QoQ. Higher depreciation and interest & financial charges contributed to the lower PAT number in the quarter.

Construction of a Greenfield glass manufacturing complex at Naidupeta in Nellore district of Andhra Pradesh is in progress. This plant is expected to be commissioned by Q1 FY13. Capacity addition at Nashik to 650 TPD with a capital expenditure of INR 7250 mn is expected to be commissioned by Q4 FY12. The current capacity utilization of the company is at 100% and the company expects the new plants at Naidupeta and Nashik also to run at full capacity once they are commissioned. HNG acquired Agenda Glas (AG), Germany during Q1FY12, through its subsidiary HNG Global GmbH. The plant has achieved efficiency of 76%, in December 2011, the best monthly figures since the plant was commissioned. The overall operations are expected to breakeven in FY13.

The company has been witnessing a reduction in its EBITDA margins (YoY) over the last few quarters, but this should see an improvement in the quarters moving ahead due to softening in commodity prices, as well as a price hike of 8% in January 2012, on 30% of HNGs sales volume. A further price hike is expected in this quarter in the month of February 2012, on the remaining 70% of the sales volume. This price hike should translate to an improved performance by HNG in the quarters ahead. At CMP the stock trades at 3.8x P/E FY13E. We maintain a HOLD on the stock with a price target of 175, says Unicon Investment research report.

Institutional holding more than 40% in Indian cos

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