HIL Ltd- Acquisition to Boost the Profitability

India Equity Value investor, Trivikram Consultants

Prashant Vaishampayan

India Equity Value investor

Picking Long Term Multi-bagger stocks

Trivikram Consultants

Trivikram Consultants is an equity research service founded by Prashant Vaishampayan, a registered Research Analyst with SEBI in India. Prashant has done equity research since 1992.  He worked with Jardine Fleming, SG Securities, UBS and Kotak Securities. Since 2010, he is managing his portfolio and doing outsourced equity research for institutional clients. A team of six professionals helps him in equity research. We focus on pharma, agro-chemicals, auto and auto components, banks and financial services, specialty chemicals and niche manufacturing sectors.   

Equity Bottom-Up

<ul class="">
<li>
<a href="https://www.smartkarma.com/entities/17390" target="_blank">Hil Ltd (HIL IN)</a>reported 2QFY19 PAT better than our estimates. Reported EBITDA margins were at 13.5%, 350 bps higher than our estimates. Expansion in EBITDA margins was attributable to internal cost control measures undertaken by HIL and to passing on the cost increases to customers. Management expects the growth momentum to continue in building solutions and plumbing business.</li>
<li>Parador Holdings acquisition was completed in 2QFY19. HIL has not shared consolidated numbers in this quarter and is likely to give details with March 19 results. Our model reflects the results of Indian operations only.   </li>
<li>Over FY18-20E, we expect revenue and PAT to grow at CAGR 16% and 21%. We expect EBITDA margin expansion of 280 bps taking margins to 14.3% in FY20E from 11.5% in FY18. We like HIL for its focus on higher margin building solutions, expected gains from Parador acquisition and a well-managed balance sheet.</li>
<li>We have maintained a PE multiple of 15x on the EPS estimate of Rs 184 for the year ending September-20E for HIL standalone business and have added value of Parador Rs 406 per share to arrive at the fair value estimate of Rs 3,170 for next 12 months.</li>
</ul>
<table class="table table-striped">
<tbody>
<tr>
<td>
Rs in mn
</td>
<td style="text-align: right;">
FY17
</td>
<td style="text-align: right;">
FY18
</td>
<td style="text-align: right;">
FY19E
</td>
<td style="text-align: right;">
FY20E
</td>
</tr>
<tr>
<td>
Revenue
</td>
<td style="text-align: right;">
   10,536
</td>
<td style="text-align: right;">
   12,787
</td>
<td style="text-align: right;">
   15,143
</td>
<td style="text-align: right;">
   17,069
</td>
</tr>
<tr>
<td>
PAT
</td>
<td style="text-align: right;">
        546
</td>
<td style="text-align: right;">
        809
</td>
<td style="text-align: right;">
     1,156
</td>
<td style="text-align: right;">
     1,189
</td>
</tr>
<tr>
<td>
EPS (Rs.)
</td>
<td style="text-align: right;">
       73.2
</td>
<td style="text-align: right;">
     107.9
</td>
<td style="text-align: right;">
     154.1
</td>
<td style="text-align: right;">
     158.5
</td>
</tr>
<tr>
<td>
PE (x)
</td>
<td style="text-align: right;">
           31
</td>
<td style="text-align: right;">
           21
</td>
<td style="text-align: right;">
           15
</td>
<td style="text-align: right;">
           14
</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source- HIL Annual Report FY18, Trivikram Consultants Research as on 12/11/2018</div>



Hil Ltd (HIL IN)reported 2QFY19 PAT better than our estimates. Reported EBITDA margins were at 13.5%, 350 bps higher than our estimates. Expansion in EBITDA margins was attributable to internal cost control measures undertaken by HIL and to passing on the cost increases to customers. Management expects the growth momentum to continue in building solutions and plumbing business.
Parador Holdings acquisition was completed in 2QFY19. HIL has not shared consolidated numbers in this quarter and is likely to give details with March 19 results. Our model reflects the results of Indian operations only.   
Over FY18-20E, we expect revenue and PAT to grow at CAGR 16% and 21%. We expect EBITDA margin expansion of 280 bps taking margins to 14.3% in FY20E from 11.5% in FY18. We like HIL for its focus on higher margin building solutions, expected gains from Parador acquisition and a well-managed balance sheet.
We have maintained a PE multiple of 15x on the EPS estimate of Rs 184 for the year ending September-20E for HIL standalone business and have added value of Parador Rs 406 per share to arrive at the fair value estimate of Rs 3,170 for next 12 months.





Rs in mn


FY17


FY18


FY19E


FY20E




Revenue


   10,536


   12,787


   15,143


   17,069




PAT


        546


        809


     1,156


     1,189




EPS (Rs.)


       73.2


     107.9


     154.1


     158.5




PE (x)


           31


           21


           15


           14




Source- HIL Annual Report FY18, Trivikram Consultants Research as on 12/11/2018

HIL- 2QFY19 Results – Building Products Driving EBITDA Margin Expansion