Innovation and R&D are being stressed by the CEO. The coming quarters will be crucial post the restructuring to see if the company outperforms peers.
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Great set of numbers by Hindware Homes Innovation limited considering the inflationary scenario and the pandemic the quarter. Retail business continues to be ebidta positive and minor loss in consumer products. Strong performance by building material division.
Q4 EPS @ 5.16
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Getting to see a lot of new trials and launches by HHIL.
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HHIL (shil) concall june 2022
1…Our Company, the erstwhile Somany Home Innovation Limited has been rebranded as
Hindware Home Innovation Limited, aligning it with the mother brand Hindware and best
leverage its impressive and hard-earned legacy. In line with this, Brilloca Limited, our wholly
owned subsidiary, has been rebranded as Hindware Limited. The brand Hindware as you know
is owned by Hindware Home Innovation Limited
2…Hindware Limited acquired the Building Products Manufacturing Business of the erstwhile HSIL via slump sale for a total consideration of around Rs. 700 crore as of 31st March
2022
3…Plastic pipe segment
=In FY22, our Plastic Pipes and Fittings business reported the sales of Rs. 606 crore. registering a growth of 51% year-on-year and in Q4
FY22 business grew to Rs. 205 crore, registering a growth of the 36% year-on-year. I am happy
to report that we continue to be the fastest growing brand in India in this segment owing to the
widespread popularity of our brand and the high quality of our product.
=Aligned with our Company’s exponential growth strategy, we continue to tap into newer
geography. Thus, the Board of Directors had approved an investment of ~Rs. 180 crore towards
setting up a new manufacturing plant for the plastic pipes in Roorkee, Uttarakhand with an initial
manufacturing capacity of 12,500 metric tons per annum.
=Our capacity expansion at existing Isnapur plant that is in Telangana is expected to be completed
by 31st December ‘22. With this our capacity will increase from 35,000 metric tons to 48,000 metric tons per annum
=We are just 3 years old into the market precisely, but we have been able to target PAN India markets. Predominantly when it comes to CPVC category, we are very strong in Southern part of India, Northern part of India and Western to a certain extent, East it is a little bit new, we
are yet to open because we have our capacity constraints at the moment otherwise geographically, we are there PAN-India
=.We are seeing a definitely a growth in the market and as such our products have been accepted, we are the fastest growing Companyin this segment as of today, just in 3 years’ time, we are growing at a CAGR of 54%
=We had given guidance that in May ‘21 that in another 4 years our
pipes business will around be Rs. 1,000 crore so we are holding onto that guidance right now.
4…BPD segment performance
=Pipes growth is 51% and sanitaryware and faucets growth is 37.4%.
=Our Sanitaryware and Faucet segment continues to outperform the market and registered one of
the best performances during the year and the quarter.
=Because of the increase in input prices there has been some price increases which have also got
passed on to the market to the consumer and it has actually taken been well by the consumers.
=Our rebranding exercise for Hindware in Hindware Italian collection which is ongoing right now has also really impacted and helped us in getting share in the sanitaryware category.
=In fact, last year we have launched many new products as well which were first in the category like a tankless water faucet and some touch free water faucets which were totally new, so the category has seen
absolutely brilliant response from the consumers.
=We are extremely positive on the sanitaryware category right now. We believe that we will continue to grow double digits and we
will continue to outperform the market.
=We are expecting 10% to 12% volume growth despite price hikes which have been taken.
Q=Is there disruption in availability of product line?
Ans=We have reduced our dependence on China for sanitaryware, but we still have sub-10% contribution of volume coming from China.
= We have developed a large number of local vendors which has really helped us even. We have in fact
done some strategic tie-ups with some local vendors and through that we have ensured that therewill not be any major supply disruptions. There may be some replacement of a specific brand orspecific model due to China specific to domestic model. But per se I do not see a major disruption
in the overall supply situation.
5…Consumer segment
=The quarter performance was largely subdued given the challenging operating environment. Elevated raw material prices and overall inflationary trend moderated the demand sentiments during Q4. E-commerce sales were also much lower during
the quarter in line with the overall trend where in the e-commerce industry in general, actually,
saw a dip in demand due to supply chain constraints, higher costs and lower demand
=From a top-line perspective I think we were in a growth phase. If you remove FY 21-22, we had a CAGR growth of more than 35% up till of FY 20-21 despite the COVID. So, primarily the
business suffered on account of two reasons for the last 2 years.
(A…covid B…Escalation of raw material prices)
=From a run rate perspective, we continue to look at desirable growth of 20% and 25%+ from at least this year, that is what we were looking at
=We had undertaken price hikes in calibrated manner during the year and the quarter to counter
the impact of higher input costs
=We continue to be a dominant player in the category of larger
kitchen appliances.
=In the sub segment of Consumer Appliances business, we are grown by 33% in the larger kitchen appliances which predominantly constitutes of kitchen chimneys.
=We are a very-very strong #2 player in this category with a 20% share and overall, we have and overall
and in the category of e-commerce which contributes to 25% of the total volume of the business
of this industry, we are a number clear #1 player of the 37% share as reported in the last year.
=So, as far as the outlook of the industry is concerned last year the industry reported anywhere
between 15% to 18% of growth and we almost doubled that. I mean our growth is almost double
of the industry growth as such.
=We continue to have one of the largest ranges of kitchen chimneys
augmented by a very-very superior range of technologically enabled products. We were the first
in the India to launch an IoT chimney, the first in India. We have the most silent chimney in the
country which is 32% more silent than the most silent chimney actually by an Italian major. So, we continue to build our portfolio on the kitchen chimneys on the larger kitchen appliances in
the back of our strong innovation.
=We have gotten more than 32 patents in the business so far which have been registered in the last 3.5 years and we continue to believe that our growth in this category of larger kitchen appliances will again be 2X of the market. We continue to believe that, and we are on that path of doing that as such
6…Growth
=We have had a pretty good year and we have outperformed all of our listed peers who ever have declared their results.
=. We believe we can outperform the market by 1.5 times over the market growth rate.
=We have a year-on-year growth of 37.4% on value terms in sanitaryware
and faucet
=pipes growth is 51%
=Our volume growth is extremely healthy in fact.
=Sanitaryware and faucets in terms of volume growth, we are around 22%
7…Margin expansion
A=CPD
=In the sanitaryware, faucet and tiles business our margins expanded by 1.64% for the year to-year and it largely came because of an improved mix which of the products which we are
selling in our portfolio.
A1=We have moved from a lot of basic products in the sanitaryware and faucet category to a higher end I would say more upgraded product. It is one pieces and wall mounts in the sanitaryware category and similarly diverter-based showers as well as higher end faucets in the faucet’s category. One product mix improvement is a significant lever which has
really helped us in terms of our improvement.
A2= Secondly, we have also done a lot of what we call a DTV work which is a design-to-value work wherein we have been able to reduce, mitigate
some of the input price increases which have happened during the course of the year by redesigning our products, re-engineering our products as so to say. There have been let us say
lightening of some of the products, we have been in terms of some specific design elements have
been removed, improved so that the cost of goods for this product have actually come down
substantially. So, this has really helped us in terms of improving our margins during the course
of the year.
A3= Both these things of course, price increase have been taken to pass on whatever is the balance input margins.
= Because of these initiatives ,we have been able to in fact expand our margins which is not the case for
most of the other organizations in our category right now.
B=PIPE BUSINESS
…last year margin was at 9.27% and this year is 8.15%. due to raw material fluctuation
C=CONSUMER BUSINESS
=Consumer Appliances business, we have given a guidance of 7% to 8% EBIT margins. So, this is more of a long-term perspective because we are building the business up.
=Right now,
if you see this business got impacted due to the higher input prices and if you see industry per
se also many players in the market in this sector, have faced these challenges but slowly and
steadily, the pass on effect is happening and that pass on impact for the consumer goods is not
that as fast as like in the pipes business which is a weekly adjustment
=. For sanitaryware and
faucets, it has happened three-four times, we have increased the prices but for consumer we feel
that price increases will happen over a period of time and that is why we will say that it is an 18 to 24 months’ guidance.
8…Capex
=We feel that we should be spending odd Rs. 170 crore around on the CAPEX which will include the initial payments towards setting up the
pipe plant. We are investing heavily into creating our branding on the retail stores and it is a massive expansion there. We will set up many stores and the visibility of the brand will be much
higher.
=And then there is normal CAPEX which is linked to Sanitaryware and faucets plant wherein we will keep debottlenecking the facilities and further enhance the product portfolio.
9…Debt
=We feel that overall spend during financial year FY 22-23 will range somewhere between Rs.
150 to 175 crore in terms of CAPEX. As a matter of prudence any CAPEX which is there, we
tend to borrow almost 70% of that as debt and if any surplus cash we generate, it goes and settle
down the working capital. Basis the numbers, we have a target to earn money.
=We feel that overall debt should be in a range of Rs. 700 crore to Rs. 800 crore as such.
=We are at around Rs. 700 odd crore of debt and eventually by the end of the year after the CAPEX and investments that we plan to do we might end up at around Rs. 750 to 800 crore and over the next 2 to 3 years, we intend to bring it down
significantly while this reduction is likely to be back ended because initially, we will be investing
more, and the debt repayments might happen maybe in FY24 or FY25.
10…Price hike
=If you see the full weighted average impact during the financial year for sanitaryware and faucets
is odd 15% but if you see the price hikes, there has been four price hikes on the sanitaryware,
another two to three price hikes on the faucets and this was SKU-by-SKU. But if you quantify
this whether I think the overall price increase should be ranging between 25% to 30% of the impact
11…Capacity utilization and vendor base
=As far as the capacity utilization is concerned what we have done is, we have expanded our vendor base. There are some few strategic vendors who
we have appointed in both sanitaryware and faucets business as well as tiles business and also
reduced our dependence on China in the last year which is what we had mentioned in our
previous investor call as well.
= As far as our own plants are concerned, we are running upwards
of 88%-90% in sanitaryware.
=But we have adequate capacity in faucet business right now. Faucet is around 65% capacity utilization
=. We intend to expand our vendor base for our sanitaryware business within India as well as in China and continue to source from there.
12…Working capital and inventory
=. If you see on a consolidated
basis, we have been able to reduce this by almost 25%-26%.
=But the better impact is there in the
building products side where the figure is much better, that the reduction in the working capital is much higher.
13…China dependence
=We have reduced our dependence on China for sanitaryware, but we still have sub-10% contribution of volume coming from China.
=We have also developed a large number of local vendors which has really helped us even. We have in fact
done some strategic tie-ups with some local vendors and through that we have ensured that there
will not be any major supply disruptions.
14…Ebit margin after restructuring
Q=. If all else was equal and I am just trying to put FY23 in perspective.
Because of the debt increase on one side and the margin attribution to the manufacturing business
coming on the other side. Can we believe that FY23 the margins would squeeze because of the
manufacturing?
Ans=Sandeep Sikka: We will have addition to the EBIT margin because many people, they are comparing the margins
of AGI Greenpac which got impacted with COVID margins. So, if you net off that since our
model for sourcing from this was on a cost-plus basis at the EBIT level which was 4.5% for this
working value for the sanitaryware & faucet and 3.5% for the pipes. That EBIT will definitely
get added so it will value accretive, it is not that it will erode the EBIT value.
Disc …invested
My latest portfolio
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2 Likes
Hindware Home Innovation - Annual Report excerpts
-
We delivered yet another year of strong performance, reporting a consolidated revenue of INR 2,294 crore, a growth of 29% over the previous year. EBITDA stood at INR 204 crore, having grown 27% from last year and PAT (after considering JV results) stood at INR 202 crore (including exception income), registering a 268% y-o-y growth
-
Our addressable market has grown by more than 10X, from INR 4,000 crore in 2010 to the current INR 50,000 crore
-
The Building Products Business, which includes Bath Products and Plastic Pipes and Fittings businesses, delivered a robust performance. In FY 2021-22, revenue for the segment stood at INR 1,795 crore, registering a growth of 42%
-
The Plastic Pipes and Fittings business, on a standalone basis, reported strong revenue and volume growth, retaining its position of being the fastest growing brand in the country in this segment. The business has grown from INR 250 crore in FY 2019-20 to INR 606 crore in FY 2021- 22, driven by our strong fundamentals
-
Groupe Atlantic France, a €2.2 billion Euro Company with a dominant presence in manufacturing and distribution of eco-friendly heating products and hot-water solutions, invested INR 68.3 crore for a 50% stake in Hintastica Private Limited (water heating solutions business), a subsidiary of Hindware Home Innovation Limited. The state-of-the-art manufacturing facility of Hintastica Private Limited is on track and is expected to be operational by FY 2022-23
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Our capacity expansion at the existing Plastic Pipes and Fittings plant in Telangana is expected to be completed before December 2022. With this addition, the capacity will increase from 35,000 metric tons to 48,000 metric tons per annum
-
We are further investing INR 180 crore in a greenfield plant in Uttarakhand for our Plastic Pipes and Fittings business, which will help us widen our footprint and grow our market share. The initial manufacturing capacity will be 12,500 metric tons per annum
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Why Market give them low valuation? Am I missing something
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Results
Sales growth YoY 98%
Sales growth 3Yr Cagr 22%
OPM 4%
EPS growth -90%
Profit growth YoY excluding exceptional gain 208%
Not able to understand results, though top line have grown very well but PAT has taken big hit. Tax rate at 59%, Interest cost 14Cr (almost 3 times as before), Depreciation 22Cr double from previous range of 9-10Cr/Quarter. Can anyone elaborate more on the quarterly result specially the PAT.
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Company bought the manufacturing unit from HSIL using debt which increased the interest. Management had told that they will clear this debt in 3years.
The manufacturing unit assets added to depreciation.
Tax rate is abnormally high for unknown reasons and should be around 25%. Maybe due to taxation related to purchase.
Company had sold 50% stake in Hinstastica Private Limited to Atlantic Socicte Francaise De Devlopment Thermique, France ("Groupe Atlantic’’) for joint venture in heating business in the last quarter for which it recorded 100Cr as exceptional gain in the last June quarter. This is causing the profit growth to look abnormally low. Removing it shows that the company actually increased its profit by 208%.
9 Likes
The company has been launching new product lines quickly.
The debt should reduce in the coming years and the abnormal profits should see a linear growth.
Margins seem to face resistance going into double digits.
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Q1 FY 23 conf call details
- Figures are on consolidated basis
- Margins were impacted higher input and commodity prices
- Top line growth 98%
- EBITDA growth ~200%
- Building products section grew at 102%
- Building products EBIT grew 105% YoY
- Building products margins at 8%
- Brass and fuel and power price increases
- price hikes taken
- Plastic pipes top line grew at 96%
- retail business top line grew at 48%
- retail margin is 1%
- sanityware and faucets - 20% earnings from new products
- added 75 new distributors
- sanityware and faucets
- pipes - brownfield and greenfield expansion on track
- consumer appliances growth was 92%
- consumer appliances cooling products grew by 200%
- EBITDA hit due to PVC price change is ~7cr
- EBIT for plastic pipes is 5.6% vs 7.2% YoY
- EBIT for sanityware and faucets 13.2% vs 7.6% YoY
- Add 13cr to building products and that’s the normalised EBITDA margin
- 10% value migration to CPVC
- Retail margins would only move to ~4% because of price hikes
- industry leading margins to be achieved by Q3 in sanitaryware
- sanitaryware plant worked at 84% capacity
- faucets plant at 56%
- pipes plant at 35% capacity
- efficiency and acquisition margin impact should be visible in 12 months if cost price stabilises
- 37% is outsourced in sanitaryware and 50% in faucets
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This is city with 1 lakh population
I think now ther are very aggressive in branding truflow.
All these banners are recent one
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Mr. Rakesh Kaul, vide letter dated 10th January, 2023, has tendered his resignation as the Whole-time Director and CEO from the Board of Directors of the Company as he wishes to pursue opportunities outside the organisation.
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Hindware concall Q3 2024
1…Our business performance should be considered in light of a challenging macro environment whereas demand has been subdued coinciding with the period of interest rate hikes and high inflation leading to slow down in consumers discretionary spend. We have achieved decent growth in Pipe business but inventory losses impacted margins
2…Although our margins and profitability have been affected, our revenue performance remains healthy owing to our established brand and product acceptance
3…Joint venture
.Further, Hintastica Pvt Ltd, the joint venture entity formed between our
Company and Groupe Atlantic of France, has commenced manufacturing
heating appliances at its advanced facility in Jadcherla, Telangana.
=We are optimistic that the commencement of the new manufacturing plant will enable
us to strengthen our market share and further consolidate our position in the
water heater segment.
4…Distribution network
…As a part of our growth focus, we’ve been strengthening our distribution
network. In the year to date, we have added 123 new distributors and 29 in Q3 alone. We launched 186 new brand shops and 46 in Q3 alone, taking our total to nearly 425 operational brand stores for brand Hindware. We have expanded to many new Tier-4, Tier-5 towns basis our distribution expansion initiatives
and enhanced our brand awareness through focused advertising and
promotion, which I’m sure you witnessed during the quarter as well.
6…Bathware division
Our enhanced product mix and new product launches drove growth of our Bathware division. Higher input costs combined with an overall inflationary environment, however, saw growth lower than our expectations.
7…Our growth strategy is multipronged.
=First of these is consistently expanding our distribution reach, and we believe there is still a significant opportunity in Tier-2 and Tier-3 series. Nearly 70% of our sales comes from non-metro towns.
=Secondly, our focus is to continue to expand and strengthen our faucets
business and institutional business, while maintaining our position in the
sanitaryware business.
=Our third area of emphasis is on strengthening our
luxury brand ‘Queo’ through a vibrant media and promotional campaign.
= All these efforts are underlined by a strong influencer program, which also
includes the plumber and architect loyalty program, which plays a significant role in product decisions of the end consumers.
8…Import
We have taken strategic decisions to reduce imports and increase local
sourcing to better safeguard us from the vagaries of international freight,
foreign exchange, and international inflation.
=We believe this will help us to
increase our efficiency, which will start reflecting in the coming quarters’
performance.
9…Capex
=Although we do not have any significant capex plans over the
next year as we are not setting up any Greenfield manufacturing plant. The
capex we proposed to incur in the coming FY24 will be setting up more brand stores to drive market growth and also on efficiency capex to optimize our own manufacturing capacity to build higher ASP and higher margin products.
9…Pipe business
…I am glad to report that our pipes and fittings business continues to be the
fastest growing in the segment with revenue up by 41% in 9M FY23 and 27% in Q3 FY23, on a year-on-year basis. EBITDA stood at Rs. 2 crores in quarter 3 and in 9 months FY23, it came to Rs. 20 crores.
=Margin pressures persisted due to the decline in PVC raw material prices leading to huge inventory losses, which stood at around Rs. 17.5 crores this quarter.
=Our expansion strategy, including both Brownfield and Greenfield initiatives, aligns with our planned objectives. Our Hyderabad plant’s brownfield capacity expansion project commenced commercial production in January 2023 increasing our capacity to 48,000 MTPA. Additionally, our Greenfield project in Roorkee is progressing as planned with the new plant expected to commence
operations in mid-FY25.
=Considering the sale of around Rs. 200 crores, which we achieved in the past 2 quarter, we are hopeful of the growth construct for our pipes and fittings business. We, in fact, anticipate that the business may exceed the target of
achieving Rs. 1,000 crores in sales well before its stated FY25 target.
10…margin expansion in bathware seg
=the Bathware segment, of course, we’ve had the gains which are coming to us now because of the fact that we are now a remerged Company along with our manufacturing. So, that’s already a part of our financials right now. We’ve, of course, seen a further increase in our input costs, especially in the gas side.
And in Q3, we’ve taken a price increase of about 6% in sanitaryware, and about 3% to 4% in faucets, which came about in the middle of quarter 3
121…Capacity utilization
=100% utilization for sanitaryware,
=faucet was underutilized to an extent to about 42%.
13…capex
=On bathware, there can be some debottlenecking investments in sanitaryware as we are reaching full capacity.
=The idea is to outsource more. We also have in-house manufacturing of various high-value-added products in the factory.
=There should be some expenditure, which will be let’s say, around Rs. 20 crore to Rs. 30 crore in the next financial year.
=We’ll continue to invest in the
development of various stores, for which we may spend another around Rs. 20 crore.
=Apart from this, the pipes project will start in terms of setting up of the
capacity, which will be initially 12,500 MTPA in Roorkee, Uttarakhand, and
further expandable. I think Rs. 70 crore to Rs. 80 crore of capex should happen in terms of releasing the orders and doing other things relating to that project.
14…Brand store
=our brand stores which is the bathware products business. Our
Hindware Brand, we kind of display all the sanitaryware and faucets products under this brand in that store.
=Under this model, the Company doesn’t own the store, the dealer owns the store. The Company is a part of the capital investment, which is required to do up the store. And then the rest of the capital is actually brought in by the dealer themselves. So, there’s a stake in the whole game from the dealer side as wel
=So, generally, we try to get them exclusive, but a large number of dealers are multi-brand here, so we then may end up getting a part of the store
15…New water heater plant.
= The plant is capable of doing around 6 lakh pieces. I’m assuming that the average price realization, which we generate is around Rs. 4,000 to Rs. 5,000 per product from this. But this is a good initiative in the sense that the market potential for this business is good.
= And we see that in the next 2-3 years, this capacity should be fully utilized. Initially, the entire material may not be sold in India. We might be exporting to other countries nearby SAARC region (except
Pakistan)
Disc…invested and adding more
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Well Cera did pretty well and none of the above impacted them it seems.
1 Like
Just wondering what prevents Hindware to get the same valuations as Cera?
The Hindware brand is pretty strnog. I can see it all around in Mumbai/Pune area - Moonbow products in home; sanitaryware, faucets in clubs, public restrooms, tiles, Truflo signages on plumber shops, etc
Return ratios are lower but can improve, since company is now in a hyper growth stage. Though debt levels look concerning.
What prevents it from being rerated the same as Cera or Kajaria or richly values pipe companies?
1 Like
Hello there,
I’m having tiles & bathroom fitting showroom in South Tamilnadu.
From may ,June and in July I’m facing low sales since 7 years I started . I spoke many of retailer across the industry. Everyone felt the same. Spoke with some dealer in morbi everyone facing the same. Is there something I should consider exiting since the stock is valued. ? Can someone guide .
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