HIL Ltd.
Performance expected to improve led by turnaround in Parador
HIL Ltd. (HIL) reported a weak performance in Q4FY24. While revenue was in line with our estimates profits were lower, mainly due to lower than expected margins in the roofing & polymer solutions segment and one time acquisition related cost of ~Rs 60 mn which was included in the other expenditure in Q4FY24 results. In Q4FY24 company reported ~1.3% YoY decline in revenue largely led by the decline in revenue of the flooring solutions segment which de-grew by ~9.5% YoY. Performance in the flooring solution segment was mostly in line with our estimates. Margins in polymer solution segment was impacted due to price cuts taken by the company in Q4FY24 which was in-line with other industry players and volumes grew by ~23% YoY. In the roofing solutions segment company reported volume growth of ~2% YoY and realisation improved by ~3% YoY and achieved highest ever sales volume in FY24. Growth in the building solutions segment in FY24 was driven by ~12% YoY increase in AAC Block volumes while realisations declined by ~8% YoY. Revenues in Polymer solution segment declined by ~2% YoY in FY24 despite a healthy volume growth due to decline in the raw material prices which was passed on to the customers. Parador business reported revenue growth of ~16% QoQ in Q4FY24 which is the third consecutive quarter of revenue growth QoQ and EBIDTA of ~Rs 50 mn. Overall management has given a positive outlook for business going forward.
Segmental Outlook:
Roofing Solutions: In the roofing solutions segment company is the market leader with market share of ~23% at the end of FY24. For FY25 expects segment revenue to grow by ~8%-10% YoY and margin improvement of ~200-300 bps YoY. Expects to continue maintain its market leadership with a strict focus on cost reduction. Witnessed good demand for roofing products in April & May 2024.
Building Solutions: Management expects revenue growth of ~20%-25% YoY and margins to improve by ~350-400 bps YoY in FY25. Next leg of growth will be driven by capacity enhancement at existing plants. Margins in the segment is expected to improve with better pricing, increase in capacity utilisation levels and better product mix.
Polymer Solution: Company is one of the fastest growing brand in pipes and fittings. For FY25 expects organic volume growth of ~25%-30% YoY in the pipes segment and ~30%-35% YoY revenue growth in putty segment. For Topline (recently acquired company) expects volume growth of ~20% YoY in FY25. Management believes PVC and CPVC prices to have largely bottomed out and hence expect stable pricing. Overall expect revenue growth of ~8%-10% YoY (ex-Topline) with stable margins.
Flooring Solutions: Management reiterated mid to long term prospects of Parador business remains strong. Order intake is now outpacing turnover which augurs well for the upcoming quarters. Company expects revenue growth of ~15%-20% YoY (volume growth of ~17%-22%) with improvement in EBIDTA margins on account of operating leverage. Expect EBIDTA margin of ~3%-4% in FY25, ~6%-7% in FY26 and further increasing to ~10%-12% in FY27.
Company is on track to achieve revenue of $1 bn over next 3-4 years & progressively advancing towards becoming a “One-Stop” building material & Solution provider. In order to reach this target, management would also take resort of any in-organic opportunities. Going forward growth will be driven from Flooring, Polymer & Building solutions segment, supported by growth from Roofing solutions segment.
Outlook and Valuation:
Considering HIL’s dominant market position in the domestic fiber cement sheet industry and its commitment to achieve USD 1 bn revenue over next 3-4 years, we continue to value the stock at 10xFY26e EPS of Rs. 309.3 to arrive at a target price of Rs. 3093. We continue to have a “Buy” rating on the stock.
Click here to download HIL Ltd – Q4FY24 Result Update – SMIFS Institutional Research
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