Buy Hindware Home Innovation; target of Rs 430: Choice Institutional Equities

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.