Hanil Era Textiles - Rs30.00

Incorporated in October 1991, Hanil Era Textiles Ltd (HETL) is jointly promoted by New Era Fabrics Ltd and South Korea's Hanil Synthetics Ltd. It manufactures and exports acrylic, cotton, viscose and blended yarns in varying textures, blends and counts and is one of the largest exporters of acrylic yarn from India. It exports its products to 21 countries including China and was awarded the highest export award by The Synthetic Rayon & Textile Export Promotion Council last year. To cash in on the post quota boom, the company has ventured a forward integration into weaving, processing & home textiles.

Its manufacturing plant at Patalganga in Raigad district of Maharashtra is a100% EOU with an installed capacity of 79,980 spindles and 504 rotors and a Dyeing plant. Under a modernisation-cum-expansion plan of Rs50 cr., the company plans to install 72 looms by mid 2006 and increase it to 120 looms later. It wants to expand its product line to include grey fabrics, processing and home furnishings. Going forward, it intends to produce terry towels as well. The modernisation will cost Rs15 cr. while expansion will account for Rs35 cr. This investment will be funded by term loans and Rs15 cr. and the balance will be from internal accruals. The company has also diversified into the manufacture of ethanol at a cost of Rs10 cr. seeing the strong demand & lucrative margin in the business. It also set up a 16MW power plant at its plant and generates revenue by selling the surplus power.HETL is regularly receiving good orders and has a healthy order book position.

Being an EOU, it’s a zero tax paying company and will remain so for the next five years. Its board has approved buy back upto 10 per cent of its equity, which may trigger a share price rise when executed. For Q3FY05, its sales increased by 22 per cent at Rs37.20 cr. but the NP was quite flat at Rs7.10 cr. Considering the growth opportunities, it could post a topline of Rs125 cr. with NP of Rs24 cr. This will yield an EPS of Rs6 on its equity of Rs41 cr. Investors are advised to buy at dips with a price target of Rs50 in the next 15 months. However, the company may be discounted poorly due to promoter concerns by the market.