Edelweiss Securities's report on Himatsingka SeideHimatsingka Seide’s (HSL) Q2FY16 revenues, at INR5.3bn, came in 4.4% above estimate and up 3% YoY, driven by improved performance in retail & distribution (retail) as the division finally turned around and reported growth of 3.7%, after 4 consecutive quarters of negative growth. The growth was driven by new program launches which however impacted margins. Manufacturing revenues and margins were inline. Overall, factoring in growth in retail, sheeting capacity addition (to be commissioned in Q1FY17) and margin improvement, we see RoE’s improving to 23.4% in FY17E from 12.5% in FY15. Maintain ‘BUY’ with TP of INR243 (INR201 earlier).Outlook and valuations: Growth with margin rise; retain ‘BUY’ Improvement in retail growth, traction in brand signing and impact of new sheeting capacity commissioning in Q1FY17 will drive overall growth going ahead. HSL’s margins are expected to improve as it starts receiving export incentives in line with its peers. Considering that RoEs will improve from 12.5% in FY15 to 23.4% in FY17 and current FY16 debt includes WIP debt, we increase our target FY17E EV/EBITDA multiple to 8.5x (7.5x earlier). Maintain ‘BUY’ with a revised TP of INR243, says Edelweiss Securities Limited research report.For all recommendations, click here 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.
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