Hydro S &S Industries Ltd - 32.00 Rs

Established in 1987 and belonging WS Group - a well known industrial group in south India, Hydro S & S Industries Ltd (HSSIL) is a leading manufacturer and supplier of high quality reinforced polypropylene compounds, thermoplastic elastomers, pultruded profiles and fibre reinforced composites. It sells its product under the brand name HYFIL, HYPRENE, XTRUGLAS which are very well accepted in the market. Reinforced polypropylene which is nothing but modified polypropylene by the addition of reinforcements such as talc, chalk, mica and glass fibre has established itself as a metal substitute in engineering applications. The company’s products find application in varied industries like automotive, electrical, furniture and home appliances segments etc with automotive being the primary sector contributing 85% of total revenue. Automotive applications include Bumpers, Instrument panels, Pillars and Side Trims and other interior & exterior plastics. HSSIL has an enviable clientele including Tata Motors, Maruti Udyog, Hyundai Motors, General Motors, Nilkamal Plastics, Supreme Industries, Whirlpool of India, Amararaja Batteries, TAFE etc

HSSIL’s has two manufacturing facilities spread across Pudukottai (near Trichy) and Pondicherry with a combined processing capability of about 18000 MTPA. For manufacturing of thermoplastic elastomers, it has a technical alliance with a leading USA based company called Advanced Elastomers Systems. Moreover it is an authorized distributor in India for a whole range of masterbatches, produced by TOSAF, Israel, a global leader in the field of performance masterbatches. Earlier company was appointed by ExxonMobil Petroleum & Chemical, BVBA as an authorised distributor in India for their ‘Santoprene’ range of thermoplastic elastomers. The company also exports its products to Nigeria, Bangladesh etc. and is also planning to venture into Malaysia, Pakistan and Burma still keeping India as main focus area. Interestingly, to de-risk the wide fluctuation in raw material prices HSSIL has entered into tolling arrangement with certain customers where it procures raw material from the customers and supply them the finished product. It has also set up godown facility at Gurgaon and Pune to meet just-in-time requirement of its clients such as Tata Motors and Maruti.

With the expansion of GM, M&M, re-entry of FIAT and the new project of Volkswagen in the vicinity of Pune, HSSIL is creating a third facility in the Pune belt to handle the increasing requirements of these OEMs. This facility will initially have an annual capacity of 6000 MTs and is expected to commence operation by March 2008. In future company also intends to set up a plant at Uttranchal in order to cater the north Indian market and avail tax benefits. For FY07 it reported sales of 101 cr and NP of 2.80 cr thereby registering an EPS of more than 4 Rs. It is expected to declare 12% dividend giving a yield of around 4% at CMP. For FY08 it may clock a turnover of 115 cr and PAT of 3.75 cr ie EPS of 6 Rs on equity of 6.50 cr. At an enterprise value of 40 cr it’s a decent buy for long term as expansion effect will be visible only in FY09.