Buy Hindware Home Innovation; target of Rs 253: Choice Equity Broking

Choice Equity Broking's report on Hindware Home Innovation

HINDWARE’ Consumer Products Business has been loss making at the EBITDA level (FY24/9MFY25 EBITDA loss of INR 125/139Mn) and has always been a drag on the core financials of HINDWARE. Separating the 2 businesses is a welcome development and would most likely rerate the Building Products Business. Additionally, Consumer Products Business, despite being loss making at EBITDA level, may be ascribed a positive value by the market as management’s focus on kitchen appliances sub segment may show path to profitability. Our proforma workings below show value unlocking of up to INR ~4,750Mn (INR 57/sh); half of it driven by rerating of Building Products Business and half of it from explicit value ascribed to loss-making Consumer Products Business.

Outlook

We continue to maintain BUY rating on the stock with a TP of 253/sh (23x FY27E EPS). We have not revised our estimates and valuation as of now. We would factor in the benefits of the composite scheme of demerger i.e. 1) revising higher the valuation multiple of Building Products Business and 2) ascribing a positive value to the Consumer Products Business, as proposed demerger scheme receives the requisite regulatory approvals. Given the recent interest of large business conglomerates (Birla/Adani groups) in the building materials sector and adjacencies (paints, wires and cables, cement), we don’t rule out any consolidation in the industry.