Sample  write-ups  
 HIL   
Vol. No. : 26    Issue No. : 31                             Friday, June 12, 2020

With a strong floor in place, ready to go through the roof

Full benefits of successful acquisition of Parador flooring business and buoyancy of the roofing business due to strong rural demand augur well


Idea

HIL

BSE Code

509675

BSE Group

B

NSE Code

HIL

ISIN Demat

INE557A01011

Reuters

HLLT.NS

Bloomberg

HIL.IN

Par Value

Rs 10

52-week High/Low

Rs 1662 / Rs 497

Current Price

Rs 1026 on BSE and Rs 1030 on NSE (as on 12 Jun 2020)

 

 

HIL (formerly Hyderabad Industries), theflagship company of the C K Birla Group is one of the country’s leadingbuilding solutions operator, with product basket comprising cement fibreroofing sheets, coloured steel sheets,  panels, wall blocks, plywood substitutes,high-quality pipes & fittings and industrial insulation.  

Full range ofbuilding products from flooring to roofing

The business operations of the company aregrouped under four major segments i.e.   roofing, building, polymer and flooringsolutions.  The roofing solutionscomprise fibre cement sheets and coloured steel sheets; the building solutionscomprise dry/wet walling products; and the polymers solutions comprise pipesand fittings and wall putty. The flooring segment is a recent addition to HIL’sportfolio through the acquisition of Parador Holdings GmbH, Germany (Parador)in September 2018. The flooring solutions segment comprise laminate flooring,engineered wood flooring, resilient flooring, skirting and accessories.  The others segment comprise wind power,material handling and process plant & equipment.  

HYSIL, an industrial thermal insulation isused in a range of applications in energy- intensive industries. In Q4 FY2020,the company sold (in the process of being transferred) its calcium silicateinsulation products business for a consideration of Rs. 80 crore, as the samedid not have synergy to its other core businesses.

 

Strong brands and distributionnetwork

HIL’s Charminar brand is an establishedmarket leader in roofing solutions. Birla Aerocon, provides Green BuildingSolutions that includes Dry Walling, Wet Walling and Plumbing solution.Parador, the category leader in design & innovations, covers woodenflooring solutions. These are easy to install, energy efficient along withbeing superior in quality.

The company has 31 manufacturing facilitiesacross the country and a robust distribution network with proximity to ultimateconsumers. The company has 38 sales depots, 7 sales offices, 2500 loyalstockists/distributors and 6500 sub dealer outlets across India.

 

Acquisition of Parador decreased dependence on asbestos-basedproducts

 

The investments in flooring and polymersolutions have increased product and customer diversification, by reducingthe company’s dependence on roofing solutions. Of the company’s FY20 consolidated revenue, about 29% came from roofingproducts, 12% from building products, 10% from polymer segment and 49% fromflooring solutions.  Roofing solutionsthough now accounts only for 1/3rd of the revenue, still  contributed about 64% of the EBIT of thecompany.

The company has also introducedasbestos-free, Fortune branded roofing solutions.  HIL has also investedin capacity addition for blocks and panels to tap the growing market demand.

Germany, Austria and other Europeancountries, which account for 90% sales of Parador GmBH (acquired in Aug 2018and now HIL international GmbH) has given diversified geographical presence forthe company.

Buoyant rural demand for roofing products

HIL is a major player in the domesticasbestos FC roofing segment with a market share of 20-22%. The company haspan-India manufacturing presence, wide distribution and dealership network, andstrong recall for its brands Charminar and Birla Aerocon. Backed by quality,solution-based approach, focussed branding efforts and strong distributionnetwork, the company’s products enjoy premium pricing over competing products.

HIL’s non-asbestos roofing product, CharminarFortune, currently targeted towards institutional customers, is findingincreasing acceptance. Hence, the company has invested in increasing itscapacities by setting up a new dedicated plant for this product in Faridabad tomeet the potential demand.

The demand for roofing sheets comes largelyfrom rural areas. After  theCovid-control lock-out was lifted from rural areas, roofing segment haswitnessed a surge in demand. The favourable rabi crop output, high reservoirlevels, the likelihood of normal monsoon coupled with the availability of locallabour ensuring smooth construction activity are all supporting strong demandfor roofing sheets. Consequently since resuming operations, the roofing segmentsales have been better compared to the same period last year.

In fact the company has taken a price hike tocapitalise on the strong demand which has substantially reduced company andchannel inventory. The price hike will help compensate for the higher-cost ofraw materials, which the company could not pass on in the last year due to poordemand.

Reduced company and channel inventory augurswell for good production growth going forward and better demand-supplymanagement which will help sustain better prices along with better volumes forthe rest of the year.

 

Parador operationsnot impacted much by COVID

Parador operations were hardly impacted inQ4FY20 despite Europe being one of the worst hit geographies during CoVID-19.In the parent geographies of Germany and Austria, from which the Parador get65% of its revenue, it  has  modified its sales approach through DIY and e-business, through which it safely providedthe deliveries, and the customers took responsibility of installations. Itworked well and helped the company to maintain momentum during tough times. Reflecting this the flooringsegment revenue increased by 6% and its segment margin jump by 240 bps to 6.5%in March 2020 quarter.

Parador’s plants have been operational evenduring lock down, with capacity utilisation for April 2020 being 65% (FY20:around 70%). With gradual lifting of lock-out in most of the Europeancountries, Parador is well placed to grow in future.

The company will expand this business ingeographies like China, Spain, France, UK, North America, Nordic countries tocapitalise on the Parador brand and under-utilised capacities. As the revenuesexpand, margins will also improve.

Building and polymersolutions will recover alongside recovery in real estate sector

Building Solution & Polymer Solutionbusinesses depend mainly on real estate sector and that too in Mega citieswhich have all come under containment area / red zones. So the recovery in thisbusinesses will depend on recovery in real estate sector in urban and metro areas.   

 

 

FY20: Flooring up,roofing down

Sales for the fiscal ended March 2020 was upby 18% to Rs 2554.91 crore driven by strong show from flooring business as wellas that of polymer solutions. While the revenue of roofing and buildingsolutions business was down by 16% & 1% respectively to Rs 733.17 crore andRS 319.42 crore that of flooring and polymer solutions was up by 71% and 9%respectively to Rs 1243.83 crore and Rs 254.49 crore.  But with OPM stand lower by 190 bps to 9.3%,the operating profit was down by 3% to Rs 237.24 crore. The PBT was down by 29%to Rs 126.28 crore hit by lower other income, higher interest anddepreciation.  The PBT after EO was downby 19% to Rs 126.92 crore on a deflated base where the company has accounted anEO expense of Rs 21.16 crore. However driven by lower taxation the PAT was upby 4% to Rs 98.98 crore.

Borrowings of the company as end of March 31,2020 stood at Rs 638.66 crore and cash and bank balance stood at Rs 89 crore. Thecompany expects to repay Standalone debt by end of the year by selling non-coreassets. Cost of debt in Parador is negligible. So interest cost will come downin future.

Valuation

We expect the company to register aconsolidated EPS of Rs 113.7 for FY21 and Rs 140.7 for FY2022.   The currentprice of Rs 1026 discounts the projected FY22 EPS by around 7.3 times.

 

HIL: Consolidated Financials

1903 (12)

2003 (12)

2103 (12P)

2203 (12P)

Sales

2168.79

2554.91

2443.42

2687.35

OPM (%)

11.2

9.3

9.6

10.6

OP

243.95

237.24

234.74

284.85

Other inc.

26.72

24.63

25.35

27.88

PBIDT

270.67

261.87

260.08

312.73

Interest

25.16

38.52

41.32

53.75

PBDT

245.51

223.35

218.77

258.98

Dep.

67.51

97.07

100.80

112.90

PBT

178

126.28

117.97

146.09

Share of Profit/(Loss) from Associates

-0.27

0.64

0.67

0.69

PBT  before EO

177.73

126.92

118.64

146.77

EO Income

-21.16

0

0.00

0.00

PBT after EO

156.57

126.92

118.64

146.77

Taxation

61.49

27.94

33.22

41.10

PAT

95.08

98.98

85.42

105.68

EPS (Rs)*

143.7

131.8

113.7

140.7

* EPS is on current equity of Rs 7.51 crore, Face value of Rs 10

# EPS is not annualised due to seasonality of business

Figures in Rs crore

Source: Capitaline Corporate Database

 

HIL: Consolidated Results

 

 

2003 (3)

1903 (3)

Var. (%)

2003 (12)

1903 (12)

Var. (%)

 

Sales

645.18

666.50

-3

2554.91

2168.79

18

 

OPM (%)

8.7

9.3

 

9.3

11.2

 

 

OP

56.32

62.05

-9

237.24

243.95

-3

 

Other inc.

5.66

5.57

2

24.63

26.72

-8

 

PBIDT

61.98

67.62

-8

261.87

270.67

-3

 

Interest

9.36

9.01

4

38.52

25.16

53

 

PBDT

52.62

58.61

-10

223.35

245.51

-9

 

Dep.

25.33

22.04

15

97.07

67.51

44

 

PBT

27.29

36.57

-25

126.28

178.00

 

 

Share of Profit/(Loss) from Associates

0.16

-0.16

 

0.64

-0.27

 

 

PBT  before EO

27.45

36.41

-25

126.92

177.73

-29

 

EO Income

0.00

0.00

0.00

-21.16

-100

 

PBT after EO

27.45

36.41

-25

126.92

156.57

-19

 

Taxation

4.58

10.27

-55

27.94

61.49

-55

 

PAT

22.87

26.14

-13

98.98

95.08

4

 

EPS (Rs)*

#

#

 

131.8

143.7

 

 

* EPS is on current equity of Rs 7.51 crore, Face value of Rs 10

# EPS is not annualised due to seasonality of business

Figures in Rs crore

Source: Capitaline Corporate Database

 

HIL  : Consolidated Segment results

Sales

2003 (3)

1903 (3)

Var. (%)

% to total

2003 (12)

1903 (12)

Var. (%)

% to total

Roofing Solutions

153.45

188.24

-18

24

733.17

873.89

-16

29

Building Solutions

78.00

85.67

-9

12

319.42

324.22

-1

12

Polymer Solutions

62.86

65.42

-4

10

254.49

232.98

9

10

Flooring Solutions

349.51

329.93

6

54

1243.83

726.13

71

49

Others

3.14

3.90

-19

0

12.55

14.78

-15

0

Total Reportable Segment

646.96

673.16

-4

100

2563.46

2172.00

18

100

Less: Inter segment revenues

1.78

0.66

8.55

3.21

Net sales

645.18

672.50

-4

2554.91

2168.79

18

PBIT

Roofing Solutions

14.37

36.52

-61

35

132.30

190.41

-31

64

Building Solutions

6.35

3.61

76

15

17.94

16.75

7

9

Polymer Solutions

-4.29

2.59

-266

-10

-3.34

2.84

PL

-2

Flooring Solutions

22.79

13.62

67

55

50.38

11.50

338

25

Others

2.18

1.41

55

5

8.08

6.65

22

4

Total

41.40

57.75

-28

100

205.36

228.15

-10

100

Less: Interest

7.33

6.94

6

28.62

17.05

68

Add: Interest Income

Add: Other un-allcoable

-6.62

-14.40

-54

-49.82

-54.53

-9

PBT

27.45

36.41

-25

126.92

156.57

-19

Figures in Rs crore

Source: Capitaline Corporate Database


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