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Hindustan Sanitaryware – HSIL – Buy

April 15, 2010

Anand Rathi has initiated coverage on HSIL with a BUY Rating. HSIL leverages its strong brand and wide distribution network by selling
complementary products (in the bathroom and kitchen ‘solutions’ category) garnered through a strategic tie-up or manufactured by
it.

India’s largest sanitaryware player with a 40% market share, HSIL could benefit from the revival in the property sector, more so given the emphasis on building affordable housing (high volumes). The container glass division’s expansion (from 600 tpd to 1,025 tpd) in 1QFY10 would drive revenue growth (ytd revenue up 35% yoy; market share up to 17% in FY10, from 10% the year prior). End-use industries are alcohol, beverages, pharma and food packaging.

HSIL is expected to report an EPS of Rs 10 and 12.7 for FY11 and FY12 respectively. Anand Rathi has a Buy rating and a target price of Rs140. A strong brand, wide distribution network for sanitaryware and expansion in container glass are likely to lead to a 35% CAGR in earnings over FY10-12.

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