HSIL is one of Daljeet Kohli’s successful stock picks. He spotted the stock in April 2014 when it was languishing at Rs. 136. He promised a target price of Rs. 180. When that got taken out on 5th May 2014, Daljeet increased the target price to Rs. 278. When that got taken out as well, Daljeet increased the target price to Rs. 330. Predictably, that target was also achieved in September 2014. Daljeet then increased the target price to Rs. 425.
The stock thereafter surged to a peak of Rs. 411 on 9th October 2014.
At the peak, HSIL gave a return of 200%+ since Daljeet’s recommendation six months ago.
However, thereafter, HSIL reported muted Q2FY15 results and the stock slumped about 17%.
At this stage, Daljeet got jittery about HSIL’s performance and he put the stock on hold. He promised to check with HSIL’s management and provide an update about its future prospects.
That update is now available. Daljeet has explained the entire scenario of HSIL’s working in great detail. At the end, he states as follows:
“HSIL Ltd has corrected ~17% over its peak price of Rs 424 post Q2FY15 results. We met the senior management of the company to assess the current operations and future growth prospects. Following are the key takeaways of the meeting:
At CMP of Rs 349, HSIL trades at PE multiple of 24.5x and 15.5x its FY15E and FY16E earnings estimate. We are positive about the robust sector outlook of building products segment. Low base of FY14 and expected improvement in profitability of both the businesses is likely to result in higher growth for the company. We continue to value the company on SOTP basis. We revise our target EV/EBITDA multiple for building products segment from 10x to 11x, taking under consideration the lower debt and higher profitability. This would still be at 25% discount to its key peer namely, Cera Sanitaryware Ltd ( which trades at a multiple of 14.5x Bloomberg estimates) as HSIL operates in diversified businesses which are not as profitable as its building product business. We maintain our EV/EBITDA multiple for packaging products segment at 4x. Accordingly, we arrive at target price of Rs 485 for the company (from Rs 380 earlier) and revise rating from HOLD to BUY.”
Now, you have to decide what you want to do based on the information provided.