In-line quarter; upbeat outlook across segments
Beat our EBITDA estimate by 4.5% mainly due to better-than-expected plastic pipe sales volume
Management provided upbeat outlook in anticipation of recovery in demand from Q3FY24 and margin improvement levers across segment
Maintain BUY with unchanged TP of Rs 600 on strong earnings growth prospects and reasonable valuations
In-line quarter: HINDWARE beat our revenue estimate by 2.8% in Q4FY24 mainly due to better-than-expected plastic pipe volume growth (+30.8% YoY vs +10% estimated). However, EBITDA was lower than our estimate by 18.3% mainly due to the impact of impairment loss of Rs 156mn related to the discontinuation of lossmaking retail business in Q4FY24. After adjusting for impairment loss, adjusted EBITDA was ahead of our estimate by 4.5% for Q4FY24. Overall, HINDWARE’s revenue grew by 0.9% YoY, but adjusted EBITDA fell 12.4% YoY in Q4FY24 due to sharp operating loss in consumer appliance segment.
Key highlights: Bathware EBITDA grew by 3.2% YoY in Q4 driven by higher revenue (+3.1%) with flat margin (+1bps YoY to 15.3%). Pipe EBITDA grew by 11.9% YoY in Q4 driven by higher volumes (+30.8%) with flat margin (+8bps YoY to 10.8%). Consumer appliances revenue fell sharply by 15.1% YoY and reported operating loss of Rs 125mn in Q4FY24 owing to weak demand and rationalisation of a few non-performing product categories. Net debt fell to Rs 8.52bn in Mar’24 from Rs 9.34 bn in Dec’23 due to better inventory management.
Outlook: We expect demand conditions to improve from Q3FY25. The company expects bathware revenue to grow at 10-15% and margin to improve by 100-200bps over the next 18-24 months. The company aims to grow its pipe volume at 15-17% YoY and margin to improve by 100bps in FY25. It expects the consumer appliances division’s performance to turn around over the next two quarters. The company plans to raise equity in future to deleverage its balance sheet.
Maintain BUY with unchanged TP of Rs 600: We maintain our BUY rating on the stock due to strong earnings growth prospects (in anticipation of healthy revenue growth prospect with levers of margin improvement for each segments) and reasonable valuations (stock trades at 29.1x on 1Y forward P/E vs historical average of 41.6x). We have reduced our EPS estimates by 26.8%/23.5% for FY25/FY26, but have kept our TP unchanged at Rs 600 as we roll forward our valuation from Sep’25 to Mar’26. We value HINDWARE at an unchanged P/E of 30x on Mar’26E EPS.
Hindware Home Innovation – Q4FY24 Result Review2 9May 24 – Research
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