Grossly Undervalued Stock

Well, the one problem with HIL (and Visaka Industries, which is its smaller competitor) is the use / reliance on asbestos. Asbestos is highly toxic and a known cause of mesothelioma cancer. It is banned in more than 50 countries and its use is dramatically restricted in others. It is only a question of time before India takes some stringent action on this. This fear has been plaguing HIL for several years now. The stock has always been cheap for that reason.

HIL is conscious of the risk (Asbesto cement roofing firm HIL shifts focus to greener building products) though the costs will rise if they shift to a non-asbestos product and the margins could take a steep cut.

There is a research report from IndiaNivesh which recommends a buy

 

Well, there is no doubt that the housing space is going to boom. There are a number of ways to play that theme. Roof top makers is only one of them. The only problem with HIL is the overhang of the asbestos issue. This has kept serious investors away from the stock. That trend may continue in the future as well until the company totally goes green.

I suggest you prepare a shopping list of the various mid-cap companies in the housing space (ceramics, sanitary ware, finance, cement, etc). We can then evaluate their respective strengths and weaknesses and decide on the appropriate stocks to play the theme.

 

Well, there is no doubt about the management's ability or the demand for the product. The company also has in place an ambitious expansion project. However, I am a bit nervous about the stock because of the asbestos issue. It is already a highly controversial issue. The Supreme Court refused to ban it even though some NGOs filed a PIL. However, there is pressure and if the Government takes some regulatory action, the stock would react adversely.

https://www.ctvnews.ca/business/banned-in-much-of-the-developed-world-asbestos-going-strong-in-india-1.1955931

https://en.wikipedia.org/wiki/Asbestos_and_the_law#India