Buy HSIL; target Rs 168: SPA Research
SPA Research is bullish on HSIL and has recommended buy rating on the stock with a target price of Rs 168 in its February 11, 2013 research report.
February 22, 2013 / 12:27 IST
SPA Research is bullish on HSIL and has recommended buy rating on the stock with a target price of Rs 168 in its February 11, 2013 research report.
"HSIL holds a dominant position in the domestic sanitaryware market with organized market share of 40% (capacity of 3.5 mn pcs) and is the second largest player in the container glass segment (capacity of 1600 tpd) with a share of ~22% (70% market share in Southern India - the biggest market for container glass). The company operates through two divisions namely Building Products (sanitaryware, bathroom & kitchen solutions) and Container Glass segment, each contributing 43% and 49% to revenues respectively.Leadership position in both its business segments coupled with largest distribution network and strong brand recall ensures buoyant prospects for HSIL and provides significant competitive edge. Increasing consumption across building products and container glass segments will result in ~20.0% & ~15.0% CAGR in their respective demand over the next few years, thereby aiding HSIL to clock a consolidated revenue growth of 18.9% in FY14.HSIL is expanding its capacities across product segments. It has increased its sanitary ware capacity from 2.8 mn pcs to 3.8 mn pcs and is further increasing it to 5 mn pcs by FY15. It is also expanding its faucet capacity by 6x to 3 mn in 2 phases by FY14 (to became the 2nd largest player). HSIL has also commissioned an additional container glass unit of 475 tpd in Q1FY13. Timely capacity expansion across the product segments will aid HSIL to cater to increased demand and maintain its market share.We expect HSIL to clock consolidated topline & bottomline CAGR of 17.7% & 15.4% respectively over FY12-14E. HSIL is poised for substantial growth post FY14 as its expanded faucet capacity comes on stream and new green-field sanitary ware plant commences operations.Dominant position in fast growing segments, timely capacity expansion, vast distribution network and strong brand recall ensures strong growth outlook for the company. Given the tremendous housing shortage in India (shortage of 1.81 crore houses), ultra low levels of sanitation facilities (one of the lowest in the world at ~40%), increasing urbanization (29% to 37% by 2025), and rise in discretionary spending (from ~52% in 2005 to ~70% by 2025) leading to increasing consumption of packaged goods, both its businesses are on strong footing. Currently the stock is trading at a P/E multiple of 6.0x FY14E earnings, 4.7x EV/EBIDTA & 0.7x FY14E BV. We recommend a "BUY" on the stock with a price target of INR 168, assuming a P/E multiple of 9x FY14E earnings," says SPA Research report.Bodies Corporate holding more than 50% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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