Hello Sir,

Hope you are doing well.

I am sure the name Hindware will ring a bell in your mind as it's a famous Sanitary ware brand. Well, it's more than a sanitary ware brand now as the company also deals in other products like pipes and fittings, faucets, kitchen and home appliances.


The erstwhile name of the company was Somany Home Innovation which has now been changed to Hindware Home Innovation. Somany Home was demerged from HSIL ltd to create a separate entity focused on the products mentioned above.

We like building products segment in general and the same has also proved to be quite lucky for us as stocks like Cera Sanitaryware and Acrysil have delivered 10x-40x returns for us and our Premium Members.

Below, we have shared our notes (unedited) from the Q4 FY 22 concall transcript of Hindware Home to understand management's views on demand, inflation, expansion, growth potential, etc.


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Hindware Home Innovation - Q4 FY 22 concall notes

Some Introduction - Our Company, the erstwhile Somany Home Innovation Limited has been re-branded as Hindware Home Innovation Limited, aligning it with the mother brand Hindware.

In line with this, Brilloca Limited, our wholly owned subsidiary, has been re-branded as Hindware Limited. The brand Hindware is owned by Hindware Home Innovation Limited.

Secondly, Hindware Limited acquired the Building Products manufacturing business of the erstwhile HSIL via slump sale for a total consideration of Rs 700 crore as of 31st March 2022.

Benefit of acquiring manufacturing business - It helps our Building products business to secure control over manufacturing processes and it gives liberty to the management to align product placement with evolving customer needs.

It also strengthens our competitive position and translates to better efficiencies. In addition, it integrates the entire value chain into a single entity, minimizes related party transactions and reduces compliance and administrative costs.

Around 300 bps EBITDA margin should increase on an overall basis due to the acquisition of the manufacturing facility.

Water heater business - Groupe Atlantic France, a € 2.2 Billion company with a dominant presence in manufacturing, developing, and distributing eco-friendly heating products and hot-water solutions, invested Rs 68.3 crore for a 50% stake in the water heater business, subsidiary of Hindware Home Innovation Limited.

What about FY 22 performance - During the year, margins were lower owing to higher input and commodity prices.

Building products (includes Bath and Pipe and fittings segments) - Revenue from operations for FY 22 stood at Rs 1,795 crore, registering a stellar growth of 42%, EBIT for the full year stood at Rs 158 crore, growing by 49%. For Q4 FY 22, the business delivered revenue growth of 20% YOY, with revenue coming in at Rs 550 crore and EBIT at Rs 57 crore.

Bath segment - In FY22 our Sanitaryware and Faucet segment revenue stood at Rs 1,190 crore registering growth of 38% and in Q4 FY22 revenue grew by about 12% YOY to Rs 345 crore

In sanitary ware, faucet and tiles business our margins expanded by 1.64% for the year and it largely came because of an improved mix.

At this point in time the contribution of our projects business is about 26%-27%. While 72% to 73% of our business is retail right now.

We believe we can outperform the market by 1.5 times over the market growth rate. Sanitary ware as a category is getting good demand right now and the market is growing upwards of 10%-12%.

Plastic pipe and fittings segment - For FY 22 reported sales of Rs 606 crore, registering a growth of 51% and for Q4 FY22 sales were at Rs 205 crore, registering a growth of 36%. In the last 2 years, the business has grown from Rs 250 crore in FY 19-20 to Rs 606 crore in FY 21-22.

Last year we had an EBIT margin on pipes of 9.27% and this year we had 8.15%.

Board of Directors have approved an investment of ~Rs 180 crore towards setting up a new manufacturing plant for the plastic pipes in Roorkee, Uttarakhand with an initial manufacturing capacity of 12,500 metric tons per annum. With this our capacity will increase from 35,000 metric tons to 48,000 metric tons per annum.

Consumer Appliances segment - During FY 22 reported revenue of Rs 431 crore, EBIT for the year stood at Rs 6 crore. For the quarter the revenue stood at Rs 121 crore, EBIT at a loss of Rs 0.6 crore. Overall performance of business was subdued primarily on account of higher input costs.

Q3 and Q2 happen to be much bigger quarters for Consumer Appliances business given the seasonality. Even at the run rate what we are doing right now we can be profitable. The challenge for the Q4 starting from the end of the Q3 were massive price hikes in the entire industry, the ocean freight from imports moving from $800 to $9000 per container.

From a top-line perspective I think we are in a growth phase. If you remove FY 21-22, we had a CAGR of more than 35% up till FY 20-21 despite the COVID. We continue to look at desirable growth of 20%-25% +

Debt - What had happened is till 31st March, 2022, out of Rs 700 crore consideration for manufacturing business, we had paid only Rs 109 crore and the balance is being paid off in Q1.

Including Rs 140 crore debt in the parent company, the overall debt by the end of Jun'22 should be around 700 crore.

What about CAPEX - Overall spend during FY 23 will be between Rs 150-175 crore in terms of CAPEX.


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Disclaimer: This is not a recommendation to buy/sell Hindware Home Innovation. These notes are as announced by the companies on exchanges and only for the purpose of information and education.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/


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