HSIL Q1 FY18 Result Update Rating - HOLD - Arihant Capital Markets

- Q1FY18 Net Revenue for the quarter was at Rs 480cr representing a decline of 19% on the quarter and a marginal growth of 0.19% YoY.

- Q1FY18 Operating EBITDA stood at Rs 53cr vs 68cr YoY , EBITDA margin declined by 22% yoy to 11% at multiyear low.
- Q1FY18 Reported PAT was at Rs12cr down by 44% on YoY basis and decrease of 62% QoQ.

Segmental Revenue Highlights:

1. Building product division, which constitutes sanitaryware, faucets and other wellness products and also the pipes, for the quarter ended 30th June 2017 achieved revenue of around 233 crores, which has ended with a marginal growth of 1% over previous year figure. And EBIT for the building product division for the same period is around 31 crores as compared to previous year figure of 34 crores.

2. Packaging division, in the quarter ended 30th June 2017, achieved a revenue of around 218 crores, against the previous figure of 246 crore. There was a de-growth due to partial impact of GST down the line and also the major was the Supreme Court order, sale of liquor ban on the highways. And that impacted the sale of liquor all across the country, and also the sale of all the ancillary products like bottles which goes into the packaging of the liquor. So it impacted both the sales de-growth and as well as the EBIT. And EBIT for the quarter ended 30 June was around 16 crores as compared to previous year corresponding figure of 26 crores.

3. Consumer products division is continuing with the growth and have achieved around 90% growth with the revenues of 31 crores. The growth could have been still higher, but despite the GST they could maintain 90% growth over previous year corresponding figure. But due to additional marketing spends, both in terms of advertisement and brand building, HSIL reported EBIT level loss is 9.31 crores, as compared to previous year loss of 2.55 crores.

4. The retail division which is the Evok brand furniture stores, did a revenue of 24 crores against the previous year figure of 20 crores, which represents almost 20% growth. And EBIT also improved from a loss of 7 crores vs loss of around 3 crores Yoy.

Valuation:

With Consumer product division growing at a faster pace, Retail space improving on their losses, we expect HSIL to post better numbers in the coming quarters. The stock is currently trading at 20.4 PE of our estimated FY19 EPS of Rs 15.4. Given the recent performance and hoping the management maintain their run rate going forward we value the company at 24x PE , and assign a price target of Rs 370 with a "HOLD" rating on the stock.

Shares of HSIL LTD. was last trading in BSE at Rs.351.65 as compared to the previous close of Rs. 351.25. The total number of shares traded during the day was 4069 in over 110 trades.

The stock hit an intraday high of Rs. 360 and intraday low of 345. The net turnover during the day was Rs. 1430431.

Source : Equity Bulls

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