CPT V24P7-Art1 (Content).pmd - Taxmann
CPT V24P7-Art1 (Content).pmd - Taxmann CPT V24P7-Art1 (Content).pmd - Taxmann
Stock Market Scripscan : Hyderabad Industries Ltd. CMP : 467.45 Traded in : NSE-BSE Marketcap : 300 crores Risk category : Low Returns expected : 40% CAGR for next 5 years. Story : Here’s a company which has excited me a great deal and gives me the hunch of digging out a huge infinite bagger in the coming years. I was looking for a counter which would be nearly debt free (high inflationary environment, double digit interest rate), should have a great brand value, better if was a household name, market leader and domestic company (recall our jockey company, Page Ind ? How about Hawkins or a TTK Prestige? Ah! all ` 10-15-20 baggers, attractive valuations (to get that great midnight comfort and sleep), good dividend yield (so that if it doesn’t perform the dividend cheque may come to the rescue) and a business model which would be simple to understand coupled with stunning prospects and potential. Hyderabad Industries Ltd. just fits in everything so perfectly, at least as per my norms! Hyderabad Industries (HIL) is a flagship company of C K Birla Group. HIL’s product range includes Fibre Cement roofing sheets (Charminar), Autoclaved Aerated Concrete Blocks and Panels (Aerocon) and Calcium Silicate insulation products (HYSIL) and Jointing material for gaskets. HIL’s most modern manufacturing plants are located at 12 locations in 8 States, viz., Andhra Pradesh, Gujarat, Haryana, Jharkhand, Kerala, Maharashtra, Orissa and Uttar Pradesh. HIL, being a market leader over several years now, has a strong and extensive distribution network with nearly 8000 sale outlets spread across the country which are serviced by its 45 depots. Company is the market leader in the asbestos-based roofing industry, with 714 MULTIBAGGER STOCK IDEA August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 94 an estimated market share of 21%. Its famous brand is ‘Charminar’ that has established over six decades now and enjoys a premium of 6- 8% over others in the market. From a mere roof manufacturing company, this company has evolved into a multi-product, green building products organization. The demand for these building products is likely to stay firm led by growth in rural housing and price advantage of asbestos sheets over galvanized iron sheets. It has gradually diversified from an one-product company into other areas such as autoclaved aerated concrete (AAC) blocks, thermal insulation products and other products like pre-fabricated building panels, Hysil powder, spares and accessories, etc. The expansion of the capacities and the overall buoyant economic scenario are boosting demand from this segment. Over half of our population still lives under thatched roofs (Kuccha roofing) and clay tiles. Thatched roof is not waterproof and poses a fire hazard besides needing regular replacement. Tiled roof needs recurring maintenance and is also not safe. Hence, security concerns coupled with rising income levels, have given impetus to the desire to shift from kuccha houses to pucca houses. Asbestos Cement Sheets (ACS) are good insulators of heat and are sound as compared to thatched, tiled or galvanized metal roofs. Additionally, ACSs are water resistant and fire resistant. ACSs are also relatively cheaper than galvanized metal roofs. ACSs require minimal maintenance and infrequent replacement, unlike thatched and tiled roofs. Hence, whenever disposable income increases, switching to ACS roofs is the most obvious choice. The ACS industry grew by 5% in FY10, by 3.5% in FY11 and further by 7% in FY12. The industry is estimated to grow at 6-9% over the next few years on account of increased income levels in rural areas coupled with various initiatives by the Central Government for affordable housing schemes, such as Indira Awas Yojana, Golden Jubilee Rural Housing Finance Scheme and Pradhan Mantri Adarsh
Gram Yojana. Additionally, other schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) guarantee employment to low-income individuals, which also helps to generate demand for the roofing industry. These Government sponsored initiatives in providing residential houses and schools for the masses in general and the poor in particular will increase the demand for Hyderabad Industries products many a times in a near future. The company has delivered a topline of 860 crores in FY- 12 (730 crores in FY 10-11) and targets the topline to cross 2000 crores by 2016. Its profits jumped to 60 crores from 50 crores in the same period. It paid a dividend of 18.5 `, translating to an yield of over 4%. The company should at least grow by 25-30% during this fiscal. The company is expected to deliver an EPS of ` 105 for FY13. This company is nearly a zerodebt company having reserves (335 crores) of nearly 50 times its equity cap (a liberal bonus which could be another trigger to rally always remains in the offing). At present prices it quotes at just 4 odd times, which is incredibly cheap for a quality company having a neat visionary management. In a country of 122 crores where 75% remain below poverty line Hyderabad Industries caters to those poor people. ROE and ROCE too should comfortably be above 20%, respectively, in the coming years which provides the required conviction to own such a quality business. A pizza franchise with 100 crores profit attracts a market-cap of 8000 crores, while as a company which provides you the required shelter trades at just around 300 crores market-cap having a profit of about 60 crores. Rationality may not be in vogue but would be someday for sure. Its Hyderabad factory is situated on 70 acres land in a very prime area of Sanatnagar which is like heart of a big city. Govt. policy is to shift all factories from Sanatnagar so that residential and office buildings can come up. Currently, some industries in this area, specially polluting pharma-industries have already been shifted. It is not very far fetched that management of HIL may plan to shift this factory too in next the 1-2 years itself. As and when it happens, it will bring huge value for its stakeholders. Altogether, a lovely bet to make you rich within a reasonable time. August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 95 ••• 715
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Gram Yojana. Additionally, other schemes such<br />
as the Mahatma Gandhi National Rural<br />
Employment Guarantee Act (MGNREGA)<br />
guarantee employment to low-income<br />
individuals, which also helps to generate demand<br />
for the roofing industry. These Government<br />
sponsored initiatives in providing residential<br />
houses and schools for the masses in general<br />
and the poor in particular will increase the<br />
demand for Hyderabad Industries products<br />
many a times in a near future. The company<br />
has delivered a topline of 860 crores in FY-<br />
12 (730 crores in FY 10-11) and targets the<br />
topline to cross 2000 crores by 2016. Its profits<br />
jumped to 60 crores from 50 crores in the same<br />
period. It paid a dividend of 18.5 `, translating<br />
to an yield of over 4%. The company should<br />
at least grow by 25-30% during this fiscal. The<br />
company is expected to deliver an EPS of `<br />
105 for FY13. This company is nearly a zerodebt<br />
company having reserves (335 crores) of<br />
nearly 50 times its equity cap (a liberal bonus<br />
which could be another trigger to rally always<br />
remains in the offing). At present prices it<br />
quotes at just 4 odd times, which is incredibly<br />
cheap for a quality company having a neat<br />
visionary management. In a country of 122<br />
crores where 75% remain below poverty line<br />
Hyderabad Industries caters to those poor people.<br />
ROE and ROCE too should comfortably be<br />
above 20%, respectively, in the coming years<br />
which provides the required conviction to own<br />
such a quality business. A pizza franchise with<br />
100 crores profit attracts a market-cap of 8000<br />
crores, while as a company which provides<br />
you the required shelter trades at just around<br />
300 crores market-cap having a profit of about<br />
60 crores. Rationality may not be in vogue but<br />
would be someday for sure. Its Hyderabad<br />
factory is situated on 70 acres land in a very<br />
prime area of Sanatnagar which is like heart<br />
of a big city. Govt. policy is to shift all factories<br />
from Sanatnagar so that residential and office<br />
buildings can come up. Currently, some industries<br />
in this area, specially polluting pharma-industries<br />
have already been shifted. It is not very far<br />
fetched that management of HIL may plan to<br />
shift this factory too in next the 1-2 years<br />
itself. As and when it happens, it will bring<br />
huge value for its stakeholders. Altogether, a<br />
lovely bet to make you rich within a reasonable<br />
time.<br />
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 95<br />
•••<br />
715
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