Choice Institutional Equities's report on Hindware Home Innovation
We maintain our BUY rating on HINDWARE with an increased TP of INR 430 (from INR 375 earlier). We factor in: 1) FY25–FY28E Revenue/EBITDA CAGR of 13/30% for Bathware segment, 2) FY25– FY28E Volume /Revenue /EBITDA CAGR of 11/13/20% for Piping segment, driven by expected improvement in Real Estate and Infra activity, and 3) FY26E/FY27E/FY28E EBITDA margin of 8.6/8.6/9.3% for Consumer Appliance business, which implies a rebound to FY23 levels owing to focus on profitable product categories. Consequently, we arrive at FY25–FY28E consolidated Revenue/EBITDA CAGR of 13/52%. We now value HINDWARE on 1–year forward (blend of FY27E– FY28E) EV/EBITDA multiple of 9x which, we believe, is conservative given a significant turnaround expected in ROCE, from 1.4% in FY25 to 19.1%, by FY28E. We did a sanity check of our EV/EBITDA TP using implied P/BV and P/E multiple.
Outlook
On our TP of INR 430, FY28E implied PB/PE multiples is 3.2x/19x. Potential slowdown in construction activities due to external factors and possible sudden fall in PVC/CPVC prices as a result of various global dynamics are risks to our BUY rating.
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