Views on HSIL 2QFY2016 Result: Angel Broking

Views of Mr. Milan Desai (Research Analyst - Mid Caps, Angel Broking) on HSIL 2QFY2016 Results:

HSIL 2QFY2016 top-line muted on top-line front:

"HSIL reported a mixed set of numbers for 2QFY2016. The top-line was muted, managing to grow by mere 1.3% on YoY basis to INR 429cr. This was lower than our estimate of INR 452cr. The Building Products business managed to grow by 8.9% YoY to INR 247cr while Packaging Products business proved to be a drag, posting a 7.5% YoY decline to INR 182cr.

The raw material cost declined by 54bp YoY to 30.3% of sales and other expenses declined by 120bp YoY to 39.1% of sales. However, employee cost increased by 178bp YoY to 13.0% of sales and as a result, EBITDA margin remained flat at 17.6%, which is more or less in line with our estimate of 18.0%. The EBIT margin for the Building Products declined by 307bp YoY to 15.4% but the same has increased by 156bp on QoQ basis; the packaging products business margin increased by 325bp YoY and 227bp QoQ to 10.2%.

The company has lowered the debt in the past year by ~INR 374cr (Partially from the QIP proceeds) and as a result, the interest expense has come down by 51.4% YoY to INR 9cr, thus adding to the bottom line. Mainly on account of lower interest expense, the bottom line grew by 27.6% YoY to INR 24 against our estimate of INR 28cr.

At the moment, the Packaging products business has been facing slowdown from the FMCG industry and there is excess capacity in the industry that seems to be hampering the top-line. Although the Building products business has maintained the momentum, the real estate / construction sector in general is facing slowdown. Although the near term outlook remains stable, long term prospects are intact especially for the Building Products segment. We maintain our ACCUMULATE rating on the stock."

Shares of HSIL LTD. was last trading in BSE at Rs.278.2 as compared to the previous close of Rs. 279.25. The total number of shares traded during the day was 22436 in over 1035 trades.

The stock hit an intraday high of Rs. 287 and intraday low of 275.4. The net turnover during the day was Rs. 6310432.

Source : Equity Bulls

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