Hitachi Home & Life Solutions (India) Ltd - Rs 120.00
Established in 1984, Hitachi Home & Life Solutions (India) Limited (HHLSL) - a subsidiary of world leader Hitachi group, Japan is engaged in the business of manufacturing and sales of air conditioners in India. While the room air conditioners and packaged air conditioners are being manufactured in India under a technical collaboration with Hitachi, Japan, the company sources the higher end of air conditioning systems like chillers, self contained roof top AC and set free from its affiliated companies worldwide. Today, HHLSL is amongst the top air conditioning companies in India with strong nationwide sales, distribution and service network comprising of 14 Branches, 250 sales and service dealers, more than 800 showroom dealers and 350 service points. It also exports air conditioners to the SAARC, Middle East and other tropical countries. Since late 2005 company has also ventured in the business of trading for the refrigerators and washing machines to capitalize its brand equity and strong distribution network in India.
Headquartered in Ahmedabad, Gujarat, HHLSL’s manufacturing facility at Kadi, Gujarat with an installed capacity of 250,000 units is among the seven Hitachi room air conditioner facilities worldwide. It also has another manufacturing facility in Silvassa. HHLSL has always been at the forefront of technology and boasts of being the first to introduce products like hi-wall splits, remote controlled ACs, ACs with plus one technology, to name a few. Last year it launched 'ACE' split AC having auto humidity control technology in it, which is able to reduce the humidity levels by nearly 27%. It also introduced ‘Iota’ in sub one tonne capacity to capture the needs of the people living or working in small apartments/cabins in metros. It also has Atom Square split AC which is a unique product having two indoors with only one outdoor working on. Its Atom & Atom XL are the smallest split AC’s in size with enough cooling power to chill a grand hall or a huge conference room. Interestingly, HHLSL even has a product called ‘Spacemaker’ designed specially to cater air conditioning requirement of telecom industry and is enjoying above 20% of market share in this segment. Recently company is marketing “Vi” series with focus on style & physical appearance along with simple functions and features.
At the same time company has introduced new range of two door refrigerators and new 'Beat Wave Wash' washing machines to increase its market share in these segments as well. On the other hand its commercial air conditioning division is also on a rampant growth mainly due to the retail sector and mall culture expanding in a big way. A trend of having BPOs and R&D centers is also picking up in India. Hence, these and other factors are leading to a significant growth in the commercial air conditioning products like ductable ACs, self contained, setfree (variable refrigerant volume system) and chillers (large air-conditioning application). A preference for the lower running cost over the initial cost is also leading to the rise in inverter based technologies. It is supplying R407C variant in the chillers which is environment friendly refrigerant. Recently it has launched 'Takumi' range of ductables ranging from 3 tonne to 16.5 tonne which is doing extremely well.
To summarize, the air conditioning market is witnessing a growth rate of nearly 25% and with only 2% penetration level for AC’s, the growth is expected to continue for coming years as well providing huge opportunity for all the players. On the back of strong demand for split AC, HHLSL currently derives 40% of revenue from split AC and 60% from window AC. Going forward the ratio is expected to get skewed towards split AC. Financially company made smart turnaround in FY05 and since then it has been able to maintain its growth momentum. For FY08 its sales was up 40% to Rs 447 cr and net profit more than doubled to Rs 42 cr posting an EPS of Rs 18 on equity of Rs 23 cr. Considering its Q1FY09 figures, company is expected to maintain its PAT of Rs 42 cr on higher sales of around Rs 525 cr. So at CMP, scrip is available at PER of less than 7x times which is reasonably cheap for an MNC with such a strong brand value. However, rising import of cheap Chinese products coupled with increasing input cost and cut throat competition is a serious cause of concern for the company. Still investors can accumulate at sharp declines with a price target of Rs 180 in 12~15 months.
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