Saturday, October 2, 2010


COMPANY BRIEF: Hyderabad Industries Ltd. (HIL) is one of the leading manufacturers of
Fibre Cement Sheets in India with a market share of about 20.5%. Its key product range include Fibre Cement Roofing Sheets sold under the brand name CHARMINAR, AAC Blocks and Panels called AEROCON, and Calcium Silicate Insulation Product (thermal insulation) called HYSIL.

⇒ HIL has an extensive presence across the country and enjoys premium brand equity in the market based on superior quality, strength and durability.

⇒ The company has diversified into value added (environmental friendly green) products, which will de‐risk its business model and diversify its revenue stream. Given the diversification into value added products, we strongly believe that HIL is due to get re‐rated and command much higher multiple in times to come.

⇒ Demand of such green building products is increasing across the world on account of serious concerns about the environment and the impact on energy consumption.

⇒ HIL is increasing the cement sheet capacity by 180000 tpa to 1079500 tpa & thermal insulation by 3000 tpa to 11500 tpa in CY11. This will help the company to keep pace with the growing demand for its products and retain significant share in the market.

⇒ Relatively speaking, HIL has far superior earnings profile and return ratios in comparison to its peers. It has a stronger balance sheet with a Debt:Equity Ratio of 0.3, ROCE of ~44%. The company has the highest operating margins in comparison to its peers.

⇒ At the current price of ` 624, the stock trades at a P/E multiple of 4.1 x FY12E earnings and P/BV multiple 1.0 x FY12E earnings. We recommend a “BUY” on the stock with a price target of ` 754, assuming a P/E multiple of 5 x FY12E earnings, an upside of 21% from the current levels, over a period of 12 months.

To read the full report: HIL