NSE Symbol HIMATSEIDE Rs 81.30
Brief about the Company ( Source ARâs of the Company)
Himatsingka Seide Limited is a vertically integrated home textile company that manufactures, retails and distributes bedding, bath, drapery and upholstery products. The Company operates two manufacturing facilities in India (Hassan and Doddballapur in Karnataka) and retail and distribution businesses across North America, Europe and Asia.
On the retail and distribution front, North America (United States, Canada and Mexico) is the largest market for the Company. Revenues from North America stood at 84.6% of Consolidated Revenues of the Company. The Company has an extremely strong presence in the North American market through its subsidiaries DWI Holdings Inc. (DWI) and Divatex Home Fashion Inc. (DHF). These subsidiaries cater to private label programs of major retailers and in addition to marketing their licensed and owned brands.
The brand portfolio of the Company for the North American markets includes its owned brand Bellora and licensed brands Calvin Klein Home, Barbara Barry, Peacock Alley, Esprit and Waverly. The Company has amongst the strongest brand portfolios in the Home Textile
space. The Calvin Klein Home brand is currently the second largest-selling bedding and bath brand sold through departmental stores in the United States.
The Company also has a strong presence in India and Europe through its Atmosphere and Bellora brands respectively. While in North America the Company is focused on servicing major retailers, in Europe and India/Asia, the Company operates exclusive stores for its
brands. In addition, it reaches the end consumer through high end Multi Brand Outlets and Department stores.
With an installed capacity of 25 million meters, the Company is amongst the largest manufacturers of Bedding, Drapery and Upholstery products out of India. The manufacturing facilities are state-of-the-art and vertically integrated.
The Company is best known for its quality products and has challenged China in the past for its silk quality. The trouble started in 2007 where it went for a huge project and heavy investments in subsidiaries in USA, Italy and signature stores. Basically, expansion done at a time where its key markets went into a recession. Further, the Company has to book a huge loss in derivatives. A good Company till 2007 was messed by projects, recession and inept handing of currency exposure. It is a different matter that the co blames the best bank in India for the derivative loss and lets not delve deep into it.
It is one of the few companies whose ARâ s are pleasure to read. Please go through ARâs from 2006 to get insights into the business. Most of my observations are taken after analysis of ARâs and hence I am not elaborating developments, happenings, etc.
Key Points :
1). Capacity utilization of bedlinen division has become stable ( largest investment of Rs 400 crs by the Company in the past plus cogen unit of Rs 60 crs).
2). Good revenue increase in subsidiaries. ( heavy investments by the Company in the past in building a good R&D chain Rs 352 cr)
3). EBITDA has started improving from 2011-12.
4). D/E after peaking in 2009-10 have shown good decline.
5). Key markets have started looking up.
6). Good brand name and has been in existence in these markets for more than a decade.
7). The demand for Home Textile expected to improve ( Read AR and also Home Textiles Today)
8). The term loans taken have an unelapsed period ranging from 11 â 22 qtrly instalments and with the improved cash flow these will be repaid /prepaid. Need to study detailed AR 14 for this. LT has reduced from Rs 453 cr in AR 13 to Rs 360 cr ( Result 14) consolidated. One can ignore ST borrowings here as it is based on WC position. Except I donât have a break-up of LT borrowings included in Current Liabilities.
9). Looks like no more derivative losses.
10). Need to study AR 14 whether loans are being repaid by its American sub.
11). Very enviable DSO over the years. ( no of days debtors)
12). Cash from operations are improving.
13). As per AR 13, its 2 largest operating subs in USA are in black except its Italian sub making a loss.
14). ROCE improving.
Going forward, the key things to watch for
- LT Debt reduction - predictable 2) Macro improvement in its key markets â looks bright as of now 3) Handling of FX exposure - once bitten twice shy 4) Improvement in performance of subs and the payback by them â looks optimistic. 5) its main RM are from China for silk and cotton in India for bedlinen.( any price spikes can affect its profit margin as it happened in the past) â nobody can predict/assess.
There is a huge market and the Company has the brands and a distribution chain to tap.
I expect the Co to do a sales of Rs 2394 crore for FY 15, profit of Rs 75 crore and EPS of Rs 8. Its fair price comes around Rs 62-70. I have been conservative in projections and ignored improvement in Net margins and rerating due to debt reduction and other factors.
No targets as I feel it is a good consumption theory from here onwards and fit for LT investment. Will be evaluated quarterly/annually with performance.
Discl: Holding from lower levels and will add more in dips.