HSIL is an established player in the sanitary ware business. In fact it is promoted by the Somany Group. Lot of people misrelate it to the tiles player but incidentally almost 80% of the top line of this business comes from the sanitary ware business and where HSIL enjoys a 40% market share. More importantly, the reason why this stock looks attractive is because again on this financials numbers side, the ROEs as well as the ROCs have been pretty good, in fact ranging between 18% to 20% over a 3-year average. The company has recently completed a brownfield expansion for its sanitary ware and bath fittings kind of segment. So it gives a decent amount of comfort that the capex cycle is over. More importantly one could see revenues and cash flows kicking in from the third quarter onwards. Also the company has made an acquisition of the Crabtree brand from Havells India which also has given decent traction to the bath fitting segments for this company.
Compnay has recorded a very good top line last year, in fact they did a bottom line of 87 crores with an EPS of roughly about Rs 14. The company should be recording an EPS of 20 this year and 27 for FY13. The bigger trigger would obviously be in FY13 when they would be getting gas supplies to actually ensure that the raw material supply inputs are also taken care of. So there could be margin expansion also and the stock ahs taken a significant beating since October. In fact the stock was trading at 180-190. So from there, the stock is now available at 124 with fundamentals not having changed significantly. So at a multiple of roughly 5 times FY13, we feel there is decent value. We could see a price of 160-165 over the next 12 months.
Source : Economic Times India
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