Buy stocks of Hyderabad Ind; target of Rs 510

“HIL, a C K Birla Group incorporated in 1946 is into the business of producing building products, engineering goods and industrial products. HIL is the market leader in its segments. HIL markets its product AC and fibre cement sheets under the well-known brand “Charminar”. The total capacity of the cement sheet is 8.55 lakh tpa, prefab building panels at 4.60 lakh tpa, prefabricated autoclaved capacity at 3.05 lakh tpa and thermal insulation capacity is 6,000 tpa. The commercial production of sheeting line 2 in Uttar Pradesh has started w.e.f. 09 February 2012. HIL is also the largest manufacturer of calcium silicate, insulation blocks, pipe sections and jointing for gasketing, thereby meeting the critical needs of the fertilizer, engineering & chemical industries. It also makes aerocon prefab panels, autoclaved aerated concrete blocks, which find applications in the construction of buildings, malls, shopping complexes and office partitioning etc. HIL’s most modern manufacturing plants are located at 12 locations in 8 states-Andhra Pradesh, Gujarat, Haryana, Jharkhand, Kerala, Maharashtra, Orissa and Uttar Pradesh. HIL has a strong & extensive distribution network with nearly 8000 sales points spread across the country which is serviced by its 45 depots.”

“During Q4FY12, sales rose 29.8% to Rs248.6 crore and net profit by 71.4% to Rs18.0 crore. (YoY). OPM and NPM stood at 13.5% and 7.2% compared to 10.9% and 5.5% respectively in Q4FY11. EPS for Q4FY12 stands at Rs24.0 Vs Rs14 in Q4FY11. During FY12, sales advanced by 18.4% to Rs857.8 crore and net profit rose by 19.8% to Rs60.6 crore. OP and NP margin stood at 13.5% and 7.1% against 13.4% and 7.0% respectively in the corresponding period last year. EPS for FY12 stood at Rs81.1.The DER as at FY12 stood at 0.21:1 (0.29:1) whereas the value of the net block stood at Rs326.4 crore (Rs289.9 crore).”

“At the CMP of Rs381, the share is trading at a P/E of 4.1x on FY12E and 3.5x on FY13E. We recommend BUY with an increased price target of Rs510 in the medium-to-long term,” says Sunidhi Securities research report.