Hyderabad Industries - Rs.307

Established in 1946 and belonging to the CK Birla Group, Hyderabad Industries Ltd. (HIL) is the market leader with around 25% market share in domestic fibre and asbestos cement sheets which are used for roofing of industrial sheds, warehouses, poultry farms, houses of weaker sections and is the most cost effective roofing material available in the market. HIL is among the oldest players and enjoys strong goodwill for its well-known 'CHARMINAR’ brand. It also manufactures new generation building products like Aerocon Panels, an in-house developed/patented product and Autoclaved Aerated Concrete (AAC) blocks. Aerocon prefab panels are used as internal & external partitions, mezzanine flooring in construction of residential quarters, malls, shopping complexes and as a substitute for traditional brick walls. AAC block, a light-weight fly-ash based cement brick, is a substitute to traditional clay bricks and has numerous advantages particularly in multi-storied buildings due to their light-weight and thermal insulation properties. The company is also engaged in the business of Thermal Insulation Products (Refractories) and jointings.

HIL’s state-of-the-art manufacturing facilities are at located Faridabad & Daruhera (Haryana), Chennai (TN), Jasidih (Jharkhand), Wada (Maharashtra), Hyderabad & Vijayawada, Timmapur (A.P) and Jaunpur (UP). Notably, the company uses only the white asbestos (Chrysotile) in its product, which is far superior and safer than the other (blue and brown) types of asbestos. Due to the strong and rising demand, it has setup a greenfield sheet manufacturing plant at Sathariya Industrial Development Area in UP, which recently commenced commercial operation augmenting its total capacity to 6,52,000 TPA. This unit is HIL's first in UP and aims to cater to the UP, Bihar, Chhattisgarh, WB, MP and Nepal markets. Moreover, to cash on the ongoing boom, company is implementing a Rs.100-cr. expansion plan involving setting up of two fibre cement sheet plants each of 120,000 TPA capacity and one AAC block manufacturing facility. With this its capacity for sheeting will stand enhanced to about 9,00,000 TPA.

In the last fiscal, the company sold its loss-making heavy engineering division to Titagarh Wagons for a consideration of Rs.1 lakh as a going concern and also amalgamated the south-based group company Malabar Building Products to consolidate its operations. With construction activity expected to accelerate further in coming years, its AAC Blocks and Aerocon Panels have entered into a new era and has a huge potential. For FY06, its sales grew by 10% to Rs.450 cr. whereas net profit quadrupled to Rs.38 cr. registering an EPS of Rs.53. But due to not so good numbers for the June’06 quarter, its share price tumbled down sharply below Rs.300 from a high of Rs.620. However, due to increased capacity and better utilization, it is expected to close FY07 with turnover of Rs.525 cr. and PAT of Rs.45 cr., which translates into EPS of Rs.60 on its equity of Rs.7.50 cr. Hence investors are recommended to buy at current levels with a price target of Rs.450 (50% appreciation) in 12-15 months.