Stock Review of Techno Funda Research Product Early Signals Early Signals Call Information Data Scrip Code Grade Face Value CMP Target Stop Loss HBL Power Systems Ltd. 517271 D 10 213 300 175 SHARE HOLDING (%) HBL Power Systems Ltd. (HBL) is a leading manufacturer of Batteries, DC Power Promoters 72.9 Systems and Electronic Products. It caters to industrial applications and has clientele FII 5.4 segment which includes telecom, railways, defence, power, non-conventional energy, FI / MF 1.8 petroleum, oil& gas, UPS etc. Body Corporates 11.8 Public & Others 8.1 It is a market leader in telecom batteries with a market share of about 50%. HBL manufactures a range of batteries such as Lead Acid (VRLA), Ni-Cad, Lithium and Silver STOCK DATA Zinc batteries and electronic products for Railways and Defence. Reuters Code HBLS.BO Foreseeing huge investment outlays in Power, Telecom and Defence sectors by Govt. Of Bloomberg Code HBPS@IN India, HBL has been aggressively expanding its capacities in the past few years. NSE Symbol HBLPOWER To enter the automotive segment, it has recently developed and test marketed PLT Mkt.Cap. 5378.5 mn batteries for diesel engines (for gensets, trucks, etc). 25.3 mn Demand in Key Sectors addressed by HBL i.e. Telecom, Railways & Core Industry 52 Weeks (H/L) Rs.330 / 90 remains firm. Its competitive position is steadily improving both in India and overseas. Its recent capex plan comprises of a Rs.2500 mn capacity expansion program in Lead- Avg. Daily 23669 Shares Acid batteries from 1020 mn AH to 1400 mn AH by FY10, which would drive the Volume (6m) company s growth in future. Price Performance (%) 1M 3M 6M During 9MFY09, while its revenues grew by 39.1%, its EBITDA margins grew by 213 bps 61 91 56 and its APAT grew by 50% YoY to Rs. 720.5 mn. 200 Days EMA Rs.176 At CMP of Rs. 213, the stock is trading at a valuation of 0.9x its FY10E ABV & 5.2x FY10E * fully diluted equity Earnings. Shares Outstanding(*) Y/E Mar Revenues APAT EBITDA AEPS (Rs.) PER (x) ROCE (%) FY08 9727.6 681.2 1548.0 28.1 7.6 16.0 25.1 1.7 FY09E 12896.0 911.6 2040.2 37.5 5.7 15.1 26.4 1.3 FY10E 15475.2 1038.5 2374.7 41.1 5.2 13.7 20.6 0.9 Viral Shah viral.shah@sushilfinance.com +91 22 4093 5045 This report based on Techno Funda Research and our View / Target Price has been derived accordingly. Please refer to the disclaimer on the last page. ROE (%) P/BV (x) Part of Bonanza 1
Q3FY09 results update: During Q3FY09, HBL s revenues remained flat at 3.4% YoY to Rs. 2985.4 mn but its EBITDA declined by of 18% YoY to Rs. 425.5 mn while its EBITDA margins decreased by 373 bps. Its PBT (including other income) stood at Rs. 236.7 mn in Q3FY09, while its APAT stood at Rs. 175.7 mn, registering a de-growth of 36.5% YoY. KEY UPDATES : Promoters raised their ownership to 72.87% end Mar 2009 from 70.52% end Dec 2008. The company has started electronic projects for specialized electronics products at multiple locations two in Andhra Pradesh (AP) and three outside AP. To cater overseas market for industrial batteries, HBL has signed a JV with ihlocall partners in Saudi Arabia to manufacture batteries at an estimated cost of $ 28 mn. As of Mar 08 JV with IAI ELTA had not yet commenced exports although the plant has been set up while the railway electronic signaling product approval had spilled over for the next financiali year. KEY RISKS: High volatility in raw material prices of lead, nickel, potassium hydroxide and cadmium hydroxide could effect the margins of the company. Delays in the investments in the sectors served by HBL could adversely affect the revenues and estimates. QUARTERLY RESULTS STATEMENT (Rs.mn) Y/E March Q3FY09 Q3FY08 Q2FY09 Revenues 2985.4 2886.3 3428.1 Total Expenses 2559.9 2367.4 2961.6 EBITDA 425.5 518.9 466.5 Interest 119.0 67.1 96.66 EBDT 306.5 451.8 369.9 Depreciation 85.7 27.5 53.0 EBT (excl O.I) 220.8 424.3 316.9 Other Income 15.9 6.4 7.3 EBT (incl O. I) 236.7 430.7 324.2 Tax 61.0 154.0 113.6 APAT 175.7 276.7 210.6 Extraordinary items 0.0 0.0 0.0 RPAT 175.7 276.7 210.6 2
BALANCE SHEET STATEMENT (Rs.mn) PROFIT & LOSS STATEMENT (Rs.mn) As on 31 st March FY10E FY09E FY08 FY07 Share Capital 252.55 242.8 242.8 242.8 Net Sales 15,475.2 12,896.0 9,727.6 5,118.5 Reserves Total 5956.5 3631.2 2783.6 2155.3 T. Shareholders Funds 6209.0 3874.0 3026.4 2398.1 Deferred tax liability 183.7 153.1 127.6 103.4 Total Debt 4,324.9 5,024.4 3,524.5 1,762.8 Capital employed 10,717.6 9,051.5 6,678.5 4,264.3 Net Block 4532.3 4260.4 2538.9 1763.5 Capital WIP 773.8 644.8 344.8 444.3 Investments 36.1 36.1 36.1 25.7 Total Current Assets 8,740.9 6,493.5 5,354.9 3,041.6 Total Current Liabilities 3,371.4371 2,390.7 1,604.6 6 1,022.1 1 Net Current Assets 5,369.5 4,102.8 3,750.4 2,019.5 Misc. Exp.not W/off 5.9 7.4 8.2 11.3 Total Assets 10,717.6 9,051.5 6,678.5 4,264.3 Total Expense 13,100.5 10,855.8 8,179.6 4,392.0 Operating Profit 2,374.7 2,040.2 1,548.0 726.5 Interest 486.3 422.9 317.5 166.1 Depreciation 348.2 278.5 154.6 84.7 Other Income 57.4 50.8 37.0 39.5 Profit before tax 1,597.7 1,389.6 1,112.9 515.2 Tax 559.2 478.0 431.7 194.5 APAT 1,038.5 911.6 681.2 320.8 Extraordinary Items - - 10.3 - RPAT 1,038.5 911.6 670.9 320.8 Source: Company, Sushil Finance Research Estimates 3
FINANCIAL RATIOS Net Sales 20 32.6 90 39.1 Adjusted Net Profit 13.9 33.8 112.4 22.2 EBITDA 16.4 31.8 113.1 30.9 EPS 9.5 33.8 112.4 11.1 CEPS 12 44.2 91 16 Gross Fixed Assets 12.1 63.6 41.2 37.8 Capital Employed 18.4 35.5 56.6 26.1 EPS (Rs.) 41.1 37.5 28.1 13.2 CEPS (Rs.) 54.9 49 34 17.8 BVPS (Rs) 245.9 159.6 124.6 98.8 PER (x) 5.2 5.7 7.6 16.1 PEG (x) 0.5 0.2 0.1 1.5 P/CEPS (x) 3.9 4.3 6.3 12 P/BVPS (x) 0.9 1.3 1.7 2.2 EV/EBITDA (x) 4.4 4.3 4.5 9 EV/Net Sales (x) 07 0.7 07 0.7 07 0.7 13 1.3 FINANCIAL RATIOS ROCE (%) 13.7 15.1 16.0 11.1 ROE (%) 20.6 26.4 25.1 14.9 EBIDTA Margin (%) 15.3 15.8 15.9 14.2 EBDTA Margin (%) 12.2 12.5 12.6 10.9 Net Profit Margin (%) 6.7 7.1 7.0 6.3 Tax/PBT (%) 35 34.4 38.8 37.7 Avg. Collection Period (Days) 86 81 84 111 Avg. Payment Period (Days) 67 68 68 88 Net Fixed Assets (x) 3.2 4.5 4.4 3.6 Total Assets (x) 1.7 1.9 2.3 1.5 Market Price per share 213 213 213 213 Market Capitalisation 5,378.5 5,171.6 5,171.5 5,171.5 Enterprise Value 10,402.9 8,696.2 6,934.3 6,572.5 Source: Company, Sushil Financial Services Estimates 4
Disclaimer As the title suggests, the objective of this report is to provide early signals to investors about stocks, which are likely to witness price up move in medium to long term. Companies are selected based on certain Fundamental / Technical indicators and it may be possible that our view on these stocks may have been formed without meeting the company management. We advise caution as far as investing / disinvesting in these stocks since these stocks are not strictly based on detailed technical / fundamental analysis. All the data appearing in this report is from sources believed to be reliable but we do not guarantee that it is correct or accurate. Additional information with respect to any securities referred to herein will be available upon request. Sushil Financial Services Private Limited and its connected companies, and their respective directors, Officers and employees (to be collectively known as SFSPL) may, from time to time, have a long or short position in the securities mentioned and may sell or buy such securities. SFSPL may act upon or make use of information contained herein prior to the publication thereof. This data sheet is for private circulation only and the said document does not constitute an offer to Buy or sell any securities mentioned herein. While utmost care has been taken in preparing the above, we claim no responsibility for its accuracy. We shall not be liable for any direct or indirect losses arising from the use thereof and the investors are requested to use the information contained herein at their own risk. 5