When we study financials of hindware, its PAT has not grown at all in last 5 yrs.(2019@55cr…2024@50cr)
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However, when we dive deep, the picture is somewhat different
1…Its revenue growth @11%(5yrs)
2019@1671 cr
2024@2795 cr
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2…Its operating growth@16.40%(5yrs)
2019@124 cr
2024@ 265 cr
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3…Why PAT is very low?
The reasons are:
A…High intetest and high depreciation due to purchase of asset from AGI greenpack
B…Loss making pipe and consumer businesses.
=In 2024, Company has
A… Around 120 cr PBT from bathware segment(91 cr in 9 months)
B…1.5 cr PBT in pipe segment
C…(-32cr) PBT in consumer
=That means ,company is losing around 30 cr profit in pipe and consumer segment.
What management says about these businesses?
A…PIPE BUSINESS
=The fixed cost structure for pipes is still high. And as the volume builds up,this fixed cost wull come down.
=There, we have already given a
double-digit 10% to 12% EBITDA coming through in the next 18, 24 months with all the investments which we are doing.
B…CONSUMER BUSINESS
=We are doubling down on the kitchen part where we are doing well.
=We’re also exiting some non-performing and low-performing categories so that we can focus the resources on the areas that we are doing well.
=On the consumer side, I feel another two or three quarters will be required in terms of rationalizing the whole things
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4…Valuation
A…As Hindware has very high depreciation and interest cost, i think EV/EBIDTA is better metric for valuation
Hindaware’s
Pe ratio@58
Ev/ebidta@ around 15
B…As consumer and pipe business are new businesses and they add atound (-30cr) to PAT, it actually inflates PE ratio.
=I think PE ratio dont give actual valuation picture here considering potential turnaround stories of these two new businesses(pipe and consumer)
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FEW NEGATIVE POINTS
1…Huge debt
2…stiff competition in bathware segment from some new listed players
3…Consumer business is still loss making
4…I may be wrong about its valuation
5…I think ,they are doing DIWORSIFICATION by entering in some unrelated products(fans😮💨 etc)
=However, management has guided about exiting from few products in consumer segment and focusing on kitchen products.
Disc…invested
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