Lovish's Portfolio

Q&A: Questions & Answers Portfolio Q&A
6

1. Roofing Solutions

  • Q2 FY25 Performance: Revenue was INR 19,998 Lakhs, a decrease from INR 20,681 Lakhs in Q2 FY24. Despite an estimated industry degrowth of about 10%, HIL increased its market share by nearly 100 basis points. PBT for the segment was INR 851 Lakhs, significantly lower than INR 1,732 Lakhs in Q2 FY24.
  • Q3 & 9M FY25 Performance: Q3 FY25 revenue was INR 21,675 Lakhs, a 4% year-on-year decline. For the 9 months ended December 31, 2024, revenue was INR 88,009 Lakhs, slightly down from INR 89,207 Lakhs in the previous year. PBT for Q3 FY25 was INR 1,065 Lakhs, lower than INR 1,640 Lakhs in Q3 FY24.

Key Influencing Factors:

  • Industry Demand: Overall demand in the roofing industry declined.
  • Pricing Pressure: Impacted revenue despite HIL maintaining its price premium.
  • Raw Material Costs: Cement and fiber import costs (forex-sensitive) affected profitability.
  • Rural Demand: Expected to improve due to good monsoons and government initiatives.
  • Value-Added Products: Growth focus on Ultracool and Aesthetic Roofs.
  • Channel Strength: Strong brand and distribution network help sustain market leadership.

2. Building Solutions

  • Q2 FY25 Performance: Revenue was INR 13,116 Lakhs, a 3% year-on-year increase. PBT was INR 678 Lakhs, up from INR 507 Lakhs in Q2 FY24. Volume growth was steady, with blocks growing over 8%.
  • Q3 & 9M FY25 Performance: Q3 FY25 revenue was INR 13,200 Lakhs, slightly down from INR 13,765 Lakhs in Q3 FY24. 9M FY25 revenue was INR 39,795 Lakhs, almost flat year-on-year. PBT for Q3 FY25 was INR 601 Lakhs, higher than INR 378 Lakhs in Q3 FY24.

Key Influencing Factors:

  • Subdued Demand: Lower government infrastructure spending impacted growth.
  • Competitive Intensity: Increased due to new capacity additions.
  • Distribution Expansion: Steps taken to increase market reach.
  • Value-Added Products: Increasing focus to sustain margins.
  • Cost Management: Focus on improving margins despite pricing pressure.

3. Polymer Solutions

  • Q2 FY25 Performance: Revenue was INR 16,501 Lakhs, a 27% year-on-year growth. However, PBT showed a loss of INR 1,538 Lakhs, compared to a profit of INR 311 Lakhs in Q2 FY24. Growth was driven by the acquisition of Crestia, with 46% revenue growth in Pipes & Fittings and 29% growth in Construction Chemicals.
  • Q3 & 9M FY25 Performance: Q3 FY25 revenue was INR 16,884 Lakhs, up from INR 14,429 Lakhs in Q3 FY24. 9M FY25 revenue was INR 52,900 Lakhs, up from INR 40,267 Lakhs. However, PBT remained negative at INR 1,408 Lakhs.

Key Influencing Factors:

  • Crestia Acquisition: Boosted revenue and volumes; synergies still being realized.
  • Construction Chemicals Growth: Strong demand, channel expansion.
  • PVC Resin Price Volatility: Sharp fluctuations affected demand and margins.
  • Government Spending (JJM): Decline in Jal Jeevan Mission spending impacted B2G sales.
  • Competitive Intensity: Pricing pressure in CPVC segment.
  • Scale & Efficiency: Focus on cost optimization to improve margins.

4. Flooring Solutions (Parador)

  • Q2 FY25 Performance: Revenue was INR 27,750 Lakhs, an 8% year-on-year increase, with 12% volume growth. PBT loss widened to INR 4,763 Lakhs from INR 4,175 Lakhs due to restructuring costs and higher marketing spends.
  • Q3 & 9M FY25 Performance: Q3 FY25 revenue grew 5% year-on-year to INR 28,754 Lakhs. 9M FY25 revenue stood at INR 87,789 Lakhs, up from INR 82,641 Lakhs. Parador achieved positive EBITDA of 1.3%, an improvement over the previous year.

Key Influencing Factors:

  • European Market Conditions: Weak sentiment in core European markets.
  • Geographical Expansion: Strong growth in North America and Asia (401% growth in H1 FY25).
  • Commercial Segment Focus: Grew 25-26% in H1 FY25.
  • Product Mix Shift: Increased focus on premium products like Engineered Wood and Modular ONE.
  • Cost Optimization: Manpower restructuring expected to save €5-6M annually.
  • Order Bookings: Remained strong despite macroeconomic challenges.

Future Outlook for Parador:

  • Revenue Growth: Aiming for 15-20% CAGR over the next few years.
  • Profitability Improvement: Positive EBITDA in Q3 & Q4 FY25; PBT break-even expected in FY26.
  • New Market Expansion: Targeting higher penetration in India, North America, and Asia.
  • Strategic Investments: Cost optimization and premium product introductions will drive profitability.

5. Overall Business Outlook

  • Polymer Solutions: Strong revenue growth but profitability challenges due to raw material volatility and competition. Focus on scaling, efficiency, and new product launches.
  • Flooring Solutions (Parador): Early signs of turnaround with volume growth, new markets, and cost optimization.
  • Building Solutions: Stable performance; margin improvement despite competitive pressures.
  • Roofing Solutions: Market leadership intact despite demand decline and pricing pressure; rural demand recovery is a key watchpoint.
  • Strategic Focus Areas:
    • Cost optimization across all segments.
    • Expansion into new geographies.
    • Increasing share of premium/value-added products.
    • Focused execution to achieve PBT break-even in loss-making segments.

In addition to this:

  • Company allotted ESOPs if I remember at above price range.
  • Moderate debt levels with a focus on improving cash flows.
  • Has a track record of rewarding shareholders with dividends.
  • My stock selection basically align on the company

P.S. There is a specific thread on HIL Ltd. Kindly refer it as well.

Disclaimer: Holding, biased, not a buy / sell recommendation, not SEBI registered. Will exit based on technical pattern.

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