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Dolat Capital
Hitachi Home (Accumulate)
CMP: ₹1,273.85
Target: ₹1,364
Hitachi Home & Life Solutions (India) Ltd (HHLS) is a subsidiary of Hitachi Appliance Inc, Japan. Hitachi Home presents a premium range of home and life solutions that enhance the quality of life and work, at home and work respectively. HHLS deal in the manufacture, trading and distribution of high-end products that include room air-conditioners, commercial air-conditioners, chillers, VRF systems, refrigerators and rooftops.
HHLS Q4FY16 performance remain much below our expectation. Lower booking of primary sales due to delay in transportation largely to the southern region led to lower topline (y-o-y) during the quarter. Reported sales came below our estimates at ₹416 crore (Dolat est ₹510 crore). Adjusted operating margin remain better at 10.8 per cent, 160 bps up y-o-y.
The company reported ₹134 crore PAT during the quarter, down 44 per cent y-o-y. We expect the delayed primary sales and increased volume in April and May (led by North and East market) will led the company to report a good Q1FY17E. Based on the new partnership with Johnson Control, the company has undergone a significant process efficiency in FY16. Going forward we expect the company will improve margin in FY17E and FY18E. We see 21 per cent CAGR in sales and 38 per cent CAGR in PAT over FY16-FY18E.
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