Hsil

somany and kajaria (the tiles business) is what is attracting me these days . the sector has still not caught investor fancy. as the sales are still way higher than the market cap for eg somany will have sales of about 1000 crores in fy 13 and the market is valuing it at only 300 crore company. kajaria and somany promoters both have been efficient and pro active during the tough times ( working capital for kajaria is in negative :: thats amazing ) and somany also has been able to reduce itconsiderably , hence the good cash flows.

with a year more and the interest rate cycle reversing ( read tail winds for the housing sector ) even a percent increase in margins coupled with increased growth can yield excellent results .

regards

ranvir

  • Conference Call By Capital Market
    • Sales rose by 17% to Rs 393.24 crore during the quarter ended December 2012. Building Products (BP) division revenue witnessed growth of 20% to Rs 184 crore. Container Glass (CG) division revenue grew by 11% to Rs 210.32 crore.
    • Net profit for the quarter was down 53% to Rs 12.26 crore during the quarter.
    • Volumes in BP division grew by 8%.
    • Margins in glass business was under pressure due to 2% increase in raw material cost and 7.5% increase in power & fuel cost. The company was not able to pass the cost increase to the customers. Capacity expansion in the glass industry is adding pressure on glass margins.
    • The blended capacity utilization of glass business in Q3 was 73%. The capacity utilization is expected to be 75% in Q4. The average capacity utilization in glass business is expected to be in the range of 82% to 85% in FY14.
    • 100% of the power for glass business is sourced through power grid or power exchange. The cost of power sourced from power grid is around Rs 6.50 to Rs 7 per kwh. The cost of power produced internally was around Rs 14. However, less than 10% of power was produced internally.
    • Container glass volumes were up 7%. FY14 glass volume is expected to go up anywhere between 15% to 20%. Revenue is expected to grow by 15% in FY13.
    • For the nine months period, the volume growth in BP segment was 9.5% and 6% for glass segment.
    • Margins in BP business were impacted due to power cost. There was price hike of 4% to 4.5% in November 2012.
    • Other income is up because insurance claim is on cash basis.
    • Revenue in BP segment is expected to grow by 20% in Q4FY13 and container glass segment is expected to grow by 14% to 15%.
    • Raw material cost as a % to sales was around 12% to 13% in BP segment and 26% for glass business segment.
    • Raw material cost for container glass is expected to soften by 4% to 5% in Q4FY13.
    • Gross debt of the company is Rs 900 crore. Long term debt is Rs 570 crore.
    • The company has added 2 stores and closed 1 store. Currently there are around 21 or 22 stores.
    • Working capital days for BP segment is 75 days and 110-112 days for glass segment.
    • The break-up of revenues of the container glass business is as follows: Liquor & Beer (60%), food (16%) among others.
    • For the expansion project in Gujarat, the company has awarded contract. Civil work will commence in 4 to 6 months time. It takes 18 to 20 months to complete the project. The project is expected to be completed in FY15.
HSIL's equity shareholders to approve scheme of amalgamation
On 01 March 2013
The equity shareholders meeting of HSIL will be held on 01 March 2013 to approve the proposed scheme of amalgamation of Garden Polymers with HSIL and the respective equity shareholders of the said companies.

there is a news item of HSIL selling its entire equity stake in the wholy owned subsidiary AGI glasspack for undisclosed amount. is this the entire glass division of HSIL or part of it? if this is the much awaited demerger of the glass division, then HSIL could see a significant rerating. does anyone know better?

As per this link,

Only a part of the container glass business is under AGI Glasspack. HSIL has another subsidiary Garden Polymers that makes PET bottles.

its little confusing , AGI Glaspac is the container glass division of HSIL . AGI Glasspack Ltd is wholly owned subsidiary of the company which doesn’t have much revenue or profits to speak off,maybe just some fixed assets .From what i understand both are different entities .

Garden polymers is in to plastic PET bottles (something like manjushree) which was acquired in 2011 and subsequently amalgamated into parent company , its contribution to topline is small compared to the glass division , less than 5% of total revenue.

Mr R B Kabra addressed the call.Highlights of the call by Capital Mkt:

For the quarter ended December 2013, net sales fell 8% to Rs 361.29 crore. PAT was down 4% to Rs 11.79 crore.

This has been a mixed quarter. It feels that the results are mixed because the company's building product business has done well. Sales grew 16% which was good. Also the growth in OPM and PAT margins were good. This division saw 36% growth in absolute profitability.

The company is focusing more and more on sales of value added products, cost control and price increase. Out of 16%, 2% was volume growth of sanitaryware, 17% was faucets growth, balance came from price increase.

Value added products have increased. It stood at 19% in Building Product segment against 17% in September 2013 quarter due to good demand.

18-20% revenue growth in building product.Q4 is usually the best quarter.

CAGR has been 20% + so the company targets 20% growth in future also. The company is seeing strong demand in tier II and tier III.

The company is in the process of commissioning large faucets plant in April 2014. Machine testing is going on. After commissioning this plant the company will become second largest faucets player (in FY 2015).

At full capacity it will have capacity of 2.5 million piece per year.

The management is confident of selling full volume as currently it already outsources 60% of the need. In FY 2015 additional sales from this plant could be in the region of Rs 100-150 crore.

In December 2013 quarter sales from the faucets business grew 25%. In volume terns it grew 17%.

The faucets market is larger than the sanitaryware business.

In FY 2015 Faucets contribution to total Building product sales should be 22-23% from 16% currently.

Sanitaryware capacity utilization is 85%.

The company does not see any issues for growth for the next two and a half year for the building product business.

Glass capacity utilization is 73% sales were down by 28% and volume was down by 25%.

Slowdown in the Glass business in December 2013 quarter was completely unexpected. Usually Q3 and Q4 are best for the company. This year the growth might have been impacted due to monsoon which lasted longer.

Profit margins have improved due to fuel cost control, power cost control and other cost measures.

OPM for this business was up at 14% against 8% in September 2013 quarter and 12% in December 2012 quarter.

The management is confident of keeping the OPM of this business at 14%. OPM can also increase in Q4 and in fact the company can possibly make profit if the sales were as good for the Q4 as seen in the month of January 2014.

For this business the company succeeded in getting price rise from the aerated water companies. It was also successful in getting 7-8% price rise from few food and pharma companies. The company is confident of getting price rise from all the food and pharma companies in next 2 months.

It has not been able to get any price rise from the Liquor companies but even this will be done in the next 2 months.

Forget beer and liquor even Pepsi and Coke rinse and use the bottle on an average or around 20 times. Beer bottles are reused 6-7 times.

Q4 is normally best for this business.

For the glass business the company has gone for alternate power and fuel options. It has also been able to get power from power exchange. Power from the power exchange is cheaper than the generated power.

The company has not seen any reduction of inventory in Q3 as sales were down but will see reduction of inventory in Q4.

Net debt was Rs 135 crore.

This is a good one…

Mr. R. B. Kabra (President âBldg Prod Div) and Mr. Anil Chandani(Sr Vice President -Corp Finance) of the Co add the concall. Key highlights by Capital Mkt;

  • The Company net sales grew 9% to Rs 423.83 crore for Q1FY15. EBITDA was up 39% to Rs 76.52 crore. Net profit surged 109% to Rs 19.07 crore. H1FY15 performance of the Company was also reasonably stable with net sales up by 11% to Rs 835.98 crore, EBITDA rose by 51% to Rs 107.55 crore, and net profit jumped 126% to Rs 34.06 crore.
  • The Company building products sales declined in Q2FY15, registering first fall in last twenty quarters, due to firstly delay in payments from dealers amid high unseen parameter into the trade whichaffects large inventory build-up in the pipeline and huge inventory at dealer end. Secondly, the Company decision to exist from tiles business due to very thin margin and choices variance,which trimmedaround 4-5% of total sales.
  • The Company expects government âSwachh Abhiyan’ schemeand corporatesbig funds for CSR activitieson building toilets and improving sanitation could reap sweet spot in coming months.EBITDA margin and PBIT margin for building material products declined around 1-2%, largely due to commissioning of Greenfield faucet plant. The Company has commissioned commercial production of Greenfield faucet plant Kehrani, Rajasthan, of 2.5 million faucet capacity with effect from 1 July 2014. Thus, in QFY15, an additional depreciation of about Rs2.5 crore came into P&L account and similarly interest cost of around Rs 2.5 crore on invested amount also came for the first time.Presently, plant is running at around 35-40% capacity, which expected to achieve plan capacity by end of current fiscal and likely absorb cost of 1.4-1.5% in EBITDA and PBIT level.
  • In order to achieve greater economy of scale, the Company has shifted the production of faucets from Bhiwadi plant to Kaharani plant with effect from November 01, 2014 till the time the Company achieve full capacity utilization at Kaharani plant.The Bhiwadi plant can be restarted whenever additional capacity for faucet production is required.The Company expects building products to achieve growth of 15-16% for full FY15, on account of benefit from launch of new products in H2FY15, and due to execution of government âSwachh Abhiyan’ scheme and corporates big funds for CSR activities.
  • The glass business division performance was extremely wellin Q2FY15, generated gain of Rs 13.75 crore at PBIT level as compared loss of Rs 8.68 crore corresponding previous quarter.The company expects there will no losses in glass business going forward, as steps taken to increase product price which will help to improve margin by 100-150 bps. The company expects plant will achieve desire capacity in next 2-3 quarters.The Company forecasts a glass business (including polymer business) will grow 10-12% in FY15. The Company expects to earn PBIT of around Rs 23 crore for full year, while achievegain ofRs 10 crore at PBT level in FY15E as compared Loss(LBT) of Rs 65 crore corresponding previous year.
  • The Company plans to raise a capital through private placement upto Rs. 250 crore to brings down the debts.

Conference Call - from Capital Markets
Expects building products to riseat 15-16%and glass business at 11-12% in FY16
The company has conducted a conference call on 20th May 2015 to discuss the financial performance for the fourth quarter ended March 2015 and FY15 and way forward. Mr. R. B. Kabra (President –Building Products Division), Mr Sandeep Sikka (Chief Financial Officer)and Mr. Anil Chandani (Senior Vice President -Corporate Finance) of the Company addressed the conference call.

Key highlights

    • The Company Q4FY15 figures were not comparable with the corresponding previous quarter pursuant to the scheme of amalgamation between Garden Polymers and HSIL being approved on 13 March 2014. Therefore the standalone results for the Q4FY14 incudes figures of the amalgamated company for full FY2014 while standalone results of the company for Q4FY15 includes figure of the amalgamated company.
    • The Company has successfully raised Rs 250 crore by QIP and used the proceeds for repayment of debts.
    • The Company debt on book was Rs 680 crore as on fourth quarter ended March 2015. Average cost of borrowing stood at 8.5%.
    • The Board of Directors of the Company has recommended payment of Dividend @ 175% i.e. Rs. 3.50 per equity share of Rs. 2/- each for the year ended March 2015.
    • The Company generates nearly 38% of revenue from India's top ten cities. Subsidiaries sales improved by 10%.
    • The Company sanitaryware plants utilization at 88-89%, faucet plants utilization at45%, and container Glass (CG) Plants utilization (based on all four furnaces) at 74% for FY15. The company expects faucet plants utilization to increase to 60-65% in FY16
    • The Company has sanitaryware plants at Bahadurgarh (Haryana) with installed capacity of 1.8 million pieces/pa and Bibinagar (Telangana) with installed capacity of 2 million pieces/pa. The Company plans brownfield expansion of 1 lakh pieces/pa at Bahadurgarh (Haryana) facility and 3 lakh pieces/pa at Bibinagar (Telangana) facility, which likely to complete by end of FY16 or by Q1FY17.
    • The Company expects building product business to grow 15-16% and glass business to grow 11-12% in FY16.
    • HSIL has entered into a distribution agreement with Groupe Atlantic (France) for distribution in India of water heaters manufactured by Atlantic International, an affiliate of Groupe Atllantic. The water heaters will start distributed by end June FY16under the Hindware Atlantic brand.

Disc: Not Invested.

Mr. R. B. Kabra (President –Building Products Div), Mr Sandeep Sikka (CFO) & Mr. Anil Chandani (Senior VP -Corporate Finance) of the Co addr the call.Key highlights by Capital Mkt
Income from Operations of the company was almost flat at Rs 412.85 crore for the quarter ended June 2015, due to growth in Building Products segment offset by losses in Packaging Products segment. The revenue from Building Products division (contributes 50% of total revenue) grew 7% to Rs 205.36 crore, while Packaging Products division (contributes 50% of total revenue) fell 0.6% to Rs 206.99 crore. OPM declined by 60 bps to 15.5% impacted by higher A&P spend on new media Advertisement. With drop in interest cost by 39% to Rs 10.42 crore but rise in depreciation by 2% to Rs 28.22 crore, the PBT inclined by 19% to Rs 26.61 crore. Taxationoutgo rose by 25% to Rs 9.26 crore, thus, net profit advanced 16% to Rs 17.35 crore.The Company incurred Rs 8 crore more towards Ad & promotion spendsin Q1FY16 for brand building by hiring brand ambassadors (Shah Rukh Khan – Hindware Italian and Jacqueline Fernandez - Queo).The Company interest outgo declined substantially in Q1FY16 due to debt payment of more than Rs 300 crore during the period.
Within the building products division, sanitaryware business witnessed a growth of 4.5% and faucets business witnessed a growth of 25% in Q1FY16.The Company has venturing into new businesses of CPVC/UPVC pipes as an extensionin building products segment and producing security caps & closures for protection of productsfrom counterfeiting. Company is spending capex of Rs 217 crore towards both these ventures. HSIL expects it will be funded in debt: equity of 2:1 i.e. Rs 150 crore from debts and Rs 50 crore from internal accrual.The pipes business in India is around Rs 19000 crore industry and of which HSIL would be addressingmarket size of around Rs 7000 crore (CPVC and UPVC pipes). There are only 3-4established players in this CPVC and UPVC sector. This industry is growing at CAGR of 25% for last five years. The Company has entered into agreement with M/s Sekisui Chemical Co. Ltd, Japan (around $9 billion Turnover Company) for supply of CPVC resin. Capital Expenditure of Rs.105 crore for putting up plant for manufacturing of CPVC and UPVC pipes and fitting used in plumbing and sanitation. This product line is extension of building product portfolio. HSIL plans to set 30,000tonnes p.a. as capacity of which 60% will constitute CPVC pipes and 40% will be UPVC pipes.HSIL expects to earn revenues of Rs 400-450 crore over next 5 years.
Specialty security caps and closures is requiredfor protection of products from counterfeiting and mainly used in pharma and liquorindustry. Capital Expenditure of around Rs.112 crore towards setting up a project for producing security Caps and Closures required for protection of products from counterfeiting. This product will be a value addition to the existing portfolio of the Packaging Products Division of the Company. In this regards, the Company has also filed for necessary product patents. HSILexpects to earn revenues of Rs 150-160 crore over next 3 years.The Company has started a compact water heater range in the country in July 2015. HSIL is looking to capture 8-10% market share of total geyser business in next 2-3 years. HSIL expects of total geyser business segment to contribute Rs 80-100 crore to its total revenue by the end of the third year.The Company brownfield expansion of 1 lakh pieces/pa at Bahadurgarh (Haryana) facility and 3 lakh pieces/pa at Bibinagar (Telangana) facility is on track, and likely to complete by end of FY16.The Company expects building product business to grow 12-15% and glass business to grow 7-9% in FY 2016.

The Capital Markets guys have not mentioned one very important point which was extensively debated - poor capital allocation by the company. They seem to be pumping in more money in the loss making glass division and apparently they had promised investors whilst raising Rs250cr through QIP that they would not be investing any further in that business. This is one of the main reasons I feel that the stock has corrected so much in the last couple of days.

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“The Company has venturing into new businesses of CPVC/UPVC pipes as an extensionin building products segment and producing security caps & closures for protection of productsfrom counterfeiting. Company is spending capex of Rs 217 crore towards both these ventures. HSIL expects it will be funded in debt: equity of 2:1 i.e. Rs 150 crore from debts and Rs 50 crore from internal accrual.The pipes business in India is around Rs 19000 crore industry and of which HSIL would be addressingmarket size of around Rs 7000 crore (CPVC and UPVC pipes). There are only 3-4established players in this CPVC and UPVC sector. This industry is growing at CAGR of 25% for last five years. The Company has entered into agreement with M/s Sekisui Chemical Co. Ltd, Japan (around $9 billion Turnover Company) for supply of CPVC resin.”

Looks like this managment is hell bent on losing money than focusing on things which they are good at…just last qtr they reduced debt and earnings started to improve…now again they are increasing capex entering into new business…no wonder the share price reflecting that

CONFERENCE CALL

Hindustan Sanitaryware & Industries (HSIL)

Expects14-15% products business growth in medium term

The company has conducted a conference call on 3rd February 2016 to discuss the financial performance for the quarter ended December 2015 and way forward. Mr. R. B. Kabra (President –Building Products Division), Mr Sandeep Sikka (Chief Financial Officer)and Mr. Anil Chandani (Senior Vice President -Corporate Finance) of the Company addressed the conference call.
Key highlights

The Company reported standalone net profit of Rs. 36.95 crore for the quarter ended December 2015, registering growth of 22%. The company’s revenue stood at Rs. 506.13 crore, up by 10%.Operating margin reduced by 160 bps to 18.84%, thus, operating profit grew 1% to Rs 95.36 crore.
The Company operates in two businesses, one is the building segment and another is the packaging segment. Building segment grew 17.3% and the packaging has grown at around 2%. The major chunk of growth comes on the upper end of the market which is premium product as well as the luxury product. Sanitaryware growth steady at 8%, while faucetsgrew at a healthy pace at ~35% driven bypenetration.
The Company Share of sanitaryware declined to 63%, while faucetsstood at around 23% and new segment consumerappliances accounted for 6% share of revenues and balanced was allied products.
The Company building products grew by 17.3% aided by consumer product and healthy uptick in faucets. Retail segment saw steady growth despite industrial bleeding. Packaging products posted steady revenue despite a high base.
The Company expects a margin expansion going forward due to better product mix and lower fuel cost as plants operates with LPG.
The Company has launched a new brand “Moonbow” for air and water purifier products.Company is likely to launch new products in the kitchen appliances space.
The Company has approved totalcapexof Rs 320 crore for FY17-18 with Rs 220 crore (new facility), Rs 40 crore (sanitary & faucets brownfield expansion) and Rs 60 crore (maintenance capex).
The Company water heater business started in the month of July and the market has very well accepted that business nowhas 5% of organized geyser market share.
The Company expects an investment of Rs 25-30 crore to be incurred towards sales, marketing, branding & distribution costs in next 18 months.
The Company expects to grow around 14-15% on a medium term range.

HSIL.pdf (814.5 KB)

Hsil promoters have bought shares from open market…they are constantly increasing stake in this quarter which indicates good growth in coming quarters…promoter holding increased from 47.11% to 47.65% to 48.40% few days back.
disc: constitutes 5% of pf

Can you please provide the source of the same? Thanks

http://www.bseindia.com/stock-share-price/stockreach_insidertrade_new.aspx?scripcode=500187&expandable=2

Some recent developments terms of business direction in HSIL.

1. HSIL Limited launches first premiere store in Bangalore, to open 12 more by end 2017

They have repeatedly said they want to increase their retail presence.

2. HSIL to open two new plants in Telangana

One plant to produce CPVC pipes and other for security products with an outlay of 300 crore.

3. After premium sanitaryware, HSIL shifts focus to consumer products

This, it states, is due to limited growth opportunities in premium sanitaryware. HSIL says the overall annual growth rate in the sanitaryware industry is 10-12 per cent. However, consumer products enjoy growth of 30-35 per cent annually, due to high penetration of new technology, mainly in urban areas. The company, which has a market share of over 40 per cent in the country’s ceramic products business, has diversified into consumer products and expects to consolidate this segment with the roll-out of new products Diversification or deworsification?

Capital allocation has been a problem with HSIL all along, which is why their ROE/ROCE is poor. Rather than focusing on their core sanitaryware business, they have been trying to experiment with different things from time to time. I find it odd that when players like Cera and Somany are extremely positive on the industry, why is HSIL going for diversification? They have improved sales in this new segment drastically - from 20 odd cr to 150 cr.

2 Likes

Finally HSIL decided to demerge its business into 2 listed entities.

http://www.bseindia.com/xml-data/corpfiling/AttachLive/8804cf81-bb61-43a5-a256-b7276a4b5b2c.pdf

@hitesh2710 what are your views?

Disc- Invested and plan to add more if it falls because of bad results of packaging segment.