BUY CMP 422.40 Target Price 480.00 HARITA SEATING SYSTEMS LTD Result Update (PARENT BASIS): Q2 FY16 NOVEMBER 12 th, 2015 ISIN: INE939D01015 Index Details Stock Data Sector Auto Parts & Equipment BSE Code 590043 Face Value 10.00 52wk. High / Low (Rs.) 434.90/151.25 Volume (2wk. Avg. Q.) 40000 Market Cap (Rs. in mn.) 3281.63 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 2737.55 3101.64 3411.81 EBITDA 169.26 212.20 252.14 Net Profit 70.93 142.04 150.48 EPS 9.13 18.28 19.37 P/E 46.27 23.10 21.81 Shareholding Pattern (%) (QUARTERLY) As on Sep-15 As on Jun-15 PROMOTER 66.35 66.35 FIIs 8.69 8.69 DIIs -- -- OTHERS 24.96 24.96 1 Year Comparative Graph HARITA SEATING SYSTEMS LTD BSE SENSEX SYNOPSIS Harita Seating Systems Limited (HSSL) is a complete solution provider for seats and seating systems for both automotive and non-automotive applications. In Q2 FY16, Net profit Jumps to Rs. 44.85 million compared to Rs. 14.67 million in Q2 FY15. An increase of 205.73% y-o-y. The company s net sales registered a growth of 9.03% y-o-y and stood at Rs. 758.16 million from Rs. 695.36 million over the corresponding quarter of previous year. For Q2 FY 16, EBITDA or Operating profit is Rs. 49.84 million, an increase of 23.15% y-o-y as against Rs. 40.47 million for Q2 FY15. The company has reported an EPS of Rs. 5.77 for the 2 nd quarter as against an EPS of Rs. 1.89 in the corresponding quarter of the previous year. Profit before tax (PBT) stood at Rs. 78.72 million in Q2 FY16 compared to Rs. 17.10 million in Q2 FY15. Registered a growth of 360.35% y-o-y. Then company has declared an interim dividend of Rs. 2.50 per share (25%) for the year ending March 31, 2016. Net Sales for the half year ended Sep 30, 2015 was Rs 1506.34 million, growth of 13.77% compared with Rs 1324.02 million for the Half year ended Sep 30, 2014. For the end of H1 FY16, Net Profit grew by 153.01% at Rs. 77.54 million compared to Rs. 30.65 million for the end of H1 FY15. Net Sales and Profit after Tax of the company are expected to grow at a CAGR of 5% & 9% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Harita Seating Systems Ltd 422.40 3281.63 9.13 46.27 6.78 25.00 Hi-Tech Gears Ltd 281.00 5213.80 13.00 21.37 3.44 25.00 Tube Investments of India LTD 404.15 73731.50 6.38 61.72 5.58 100.00 FIEM Industries LTD 632.50 7506.30 36.54 17.17 3.30 70.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q2 FY16, Harita Seating Systems Ltd provides complete seating solutions for driver and cabin seating for commercial vehicles, tractors and construction equipment, as well as passenger seats for buses across all segments and has established itself as a leader in these segments in the country for seating systems. The company has reported its financial results for the quarter ended 30 th September, 2015. Rs. In million Sep-15 Sep-14 % Change Net Sales 758.16 695.36 9.03% PAT 44.85 14.67 205.73% EPS 5.77 1.89 205.73% EBITDA 49.84 40.47 23.15% The company has achieved a turnover of Rs. 758.16 million for the 2 nd quarter of the financial year 2016 as against Rs. 695.36 million in the corresponding quarter of the previous year. EBITDA of Rs. 49.84 million in Q2 FY16 and increase of 23.15% y-o-y against the corresponding period of last year. In Q2 FY16, net profit of Rs. 44.85 million compared to Rs. 14.67 million in Q2 FY15. The company has reported an EPS of Rs. 5.77 for the 2 nd quarter as against an EPS of Rs. 1.89 in the corresponding quarter of the previous year. Break up of Expenditure During the quarter, total Expenditure rose by 9 per cent mainly on account of increased cost of materials consumed by 5%, other expenditure by 22%, Employee benefits Expenses 20% are the primary attribute for the growth of expenditure when compared to corresponding quarter of previous year. Total expenditure in Q2 FY16 stood to Rs. 728.15 million as against Rs. 668.43 million in Q2 FY15. Break up of Expenditure (Rs. In million) Q2 FY16 Q2 FY15 Cost of Material Consumed 553.32 526.47 Employee Benefit Expenses 88.13 73.34 Dep & Amortization Expenses 11.71 10.97 Other Expenses 73.01 59.93
COMPANY PROFILE Harita Seating Systems Limited (HSSL) is a complete solution provider for seats and seating systems for both automotive and non-automotive applications. HSSL manufactures, driver seats for commercial vehicles, buses, tractors, off-road vehicles, cars, multi-utility vehicles, two wheeler and three wheeler segments; passenger seats for buses, cars, multi-utility vehicles and three wheeler segments; and seating systems to the railway and auditorium segment. The company also offers products for automotive industry through polyurethane composites. Established in 1986, HSSL commenced its commercial production in 1988. Today HSSL has established itself as the leader in development & manufacture of innovative seats & seating systems for the commercial vehicles, buses, tractors & off-road vehicle industry. Harita Seating Systems has five manufacturing locations in India. The headquarter is located at Hosur (near Bangalore). It has established manufacturing facility at Ranjangaon (near Pune) to cater to the needs of customers in Western India. Another major unit is at Nalagarh (Himachal Pradesh) for its business improvement in Northern area. The company has also got plants in Chennai and Bangalore to cater to the needs of foaming requirements of customers. The Company plants are certified for TS 16949. In addition, the Quality laboratory at the Company is certified by National Accreditation Board for Testing and Calibration Laboratories (NABL) for conformance to ISO/IEC 17025. The Company has also developed and established a good supply relationship with a Global OEM for export of seats to the United States. Products: Commercial vehicles: Static / mechanical suspended / pneumatic suspended driver seat, summer seat, co-driver seats & sleeper berths. Buses: Passenger seats for deluxe, semi-deluxe, standard & school bus segment. Driver & co-driver seats. Tractors: Driver & fender seats. Driver seat with special features like operator presence switch, seat belt, sliding etc meeting global standards. Off-road vehicles: Pneumatic / mechanical suspended driver seats. Cars & MUVs: Driver seat, middle seat & rear seats. Driver seats with climate control system.
Two wheelers & three wheelers: Seats for motorcycles, scooters, mopeds & autos. Foam pads & Head rest: Foam pads and head rest for passenger vehicles (tier-2 supplier). Polyurethane composites: Components using long fiber injection and micro cellular urethane technology. Subsidiary Harita Fehrer Limited, Chennai (HFRL) is the only subsidiary of the Company.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, 2014-2017E FY14A FY15A FY16E FY17E I. EQUITY AND LIABILITIES: A. Shareholders Funds a) Share Capital 77.69 77.69 77.69 77.69 b) Reserves and Surplus 360.00 406.19 495.55 584.75 Sub-Total-Net worth 437.69 483.88 573.24 662.44 B. Non-Current Liabilities: a) Long-term borrowings 8.45 0.00 0.00 0.00 b) Deferred Tax Liabilities [Net] 22.19 19.16 20.39 21.41 c) Other Long Term Liabilities 4.67 4.28 4.00 3.80 d) Long Term Provisions 23.01 33.94 41.41 48.78 Sub-Total-Long term liabilities 58.32 57.38 65.79 73.98 C. Current Liabilities: a) Short-term borrowings 218.13 240.60 211.73 190.56 b) Trade Payables 401.27 445.50 469.56 488.34 c) Other Current Liabilities 351.20 234.74 183.10 146.48 d) Short Term Provisions 51.07 47.83 79.40 91.31 Sub-Total-Current Liabilities 1021.67 968.67 943.78 916.68 TOTAL-EQUITY AND LIABILITIES (A+B+C) 1517.68 1509.93 1582.81 1653.10 II. ASSETS: D. Non-Current Assets: Fixed Assets i. Tangible assets 402.04 386.31 374.72 378.47 ii. Intangible assets 2.34 3.58 4.65 5.35 iii. Capital Work in Progress 2.84 13.29 21.53 29.71 a) Sub-total Fixed Assets 407.22 403.18 400.90 413.53 b) Non Current Investments 285.70 285.70 285.70 285.70 c) Long Term Loans and Advances 76.99 3.36 1.51 2.11 d) Other non-current assets 3.58 4.38 5.10 5.81 Sub-Total-Non-Current Assets 773.49 696.62 693.21 707.16 E. Current Assets: a) Current Investments 0.00 0.00 0.00 0.00 b) Inventories 70.08 93.81 118.20 134.90 c) Trade Receivables 502.30 532.85 569.34 595.52 d) Cash and Bank Balances 9.96 17.23 23.78 30.82 e) Short Term Loans and Advances 134.14 142.36 149.76 155.15 f) Other Current Assets 27.71 27.06 28.52 29.55 Sub-Total-Current Assets 744.19 813.31 889.60 945.94 TOTAL-ASSETS (D+E) 1517.68 1509.93 1582.81 1653.10
Annual Profit & Loss Statement for the period of 2014A to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 2501.25 2737.55 3101.64 3411.81 Other Income 34.19 64.37 69.52 78.14 Total Income 2535.44 2801.92 3171.16 3489.95 Expenditure -2379.60-2632.66-2958.97-3237.81 Operating Profit 155.84 169.26 212.20 252.14 Interest -50.59-47.10-28.26-23.91 Gross profit 105.25 122.16 183.94 228.23 Depreciation -46.32-40.78-43.00-45.84 Exceptional Items 0.00 0.00 44.74 0.00 Profit Before Tax 58.93 81.38 185.68 182.40 Tax -12.35-10.45-43.63-31.92 Net Profit 46.58 70.93 142.04 150.48 Equity capital 77.69 77.69 77.69 77.69 Reserves 360.00 406.19 495.55 584.75 Face value 10.00 10.00 10.00 10.00 EPS 6.00 9.13 18.28 19.37 Quarterly Profit & Loss Statement for the period of 31 st Mar, 2015 to 31 st Dec, 2015E Value(Rs.in.mn) 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15E Description 3m 3m 3m 3m Net sales 729.22 748.18 758.16 780.90 Other income 7.92 25.95 8.12 24.23 Total Income 737.14 774.13 766.28 805.13 Expenditure -698.74-714.46-716.44-743.42 Operating profit 38.40 59.67 49.84 61.71 Interest -10.26-8.25-4.15-4.37 Gross profit 28.14 51.42 45.69 57.34 Depreciation -7.67-11.09-11.71-11.08 Exceptional Items 0.00 0.00 44.74 0.00 Profit Before Tax 20.47 40.33 78.72 46.26 Tax -1.94-7.64-33.87-10.13 Net Profit 18.53 32.69 44.85 36.13 Equity capital 77.69 77.69 77.69 77.69 Face value 10.00 10.00 10.00 10.00 EPS 2.39 4.21 5.77 4.65
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 6.00 9.13 18.28 19.37 EBITDA Margin (%) 6.23 6.18 6.84 7.39 PBT Margin (%) 2.36 2.97 5.99 5.35 PAT Margin (%) 1.86 2.59 4.58 4.41 P/E Ratio (x) 70.45 46.27 23.10 21.81 ROE (%) 10.64 14.66 24.78 22.72 ROCE (%) 30.43 28.99 32.51 34.93 Debt Equity Ratio 0.52 0.50 0.37 0.29 EV/EBITDA (x) 22.45 20.71 16.35 13.65 Book Value (Rs.) 56.34 62.28 73.79 85.27 P/BV 7.50 6.78 5.72 4.95 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 422.40, the stock P/E ratio is at 23.10 x FY16E and 21.81 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.18.28 and Rs.19.37 respectively. Net Sales and Profit after Tax of the company are expected to grow at a CAGR of 5% & 9% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 16.35 x for FY16E and 13.65 x for FY17E. Price to Book Value of the stock is expected to be at 5.72 x and 4.95 x respectively for FY16E and FY17E. We recommend BUY in this particular scrip with a target price of Rs.480.00 for Medium to Long term investment.
INDUSTRY OVERVIEW In 2014-15, the economy grew at 7.4% (revisedseries) as against 6.9% (revised series) previous year. Harita Seating Systems Ltd registered sales at Rs.2737.55 mn in 2014-15 as against Rs.2501.25 mn in 2013-14. During the year, efficiency in supply chain was improved through inter-plant coordination, horizontal deployment of lean and other improvement initiatives was done across all plants. These initiatives, along with the implementation of various other cost reduction projects across functions have enabled the Company to post a profit before tax of Rs.813.83 lakhs in 2014-15. OPPORTUNITIES AND THREATS Harita Seating Systems Ltd has initiated product development activities to maintain the leadership position in the tractor segment in the domestic market. The Company continues to supply products to export markets and is exploring opportunities to increase export sales. As a leader in the bus passenger seats with a wide range of seats, the Company has further strengthened its position with new product variant launches, including the seats for deluxe, standard and school bus segments. The Company expects the added features to support further growth in this segment. A significant competitive threat is the entry of overseas competition and the Indian bus body builders getting into seat manufacturing. During the past few years, international seating companies have entered India with plans for local manufacturing facility either directly or through joint ventures. The Company continues to invest in the indigenous design capability to counter and address this threat. The continued slow-down in the Tractor industry is a threat to the Company owing to the large share of domestic sales. The Company is taking steps to expand the customer base and market spread to counter this threat. PRODUCT-WISE PERFORMANCE The Company posted a growth of 9% in the overall sales. The Company's sales grew in the Commercial Vehicle segment and bus passenger seats by 17% and 7% respectively. BUSINESS OUTLOOK AND OVERVIEW Indian economy is expected to grow at 7.8-8% in 2015-16. The M&HCV and LCV segments are estimated to grow at 15% and 8% respectively. Bus segment is also expected to grow at 8% in 2015-16. In contrast, the tractor segment is expected to decline in the year 2015-16. RISKS AND CONCERNS The weakness in rural economy persists owing to nominal growth in crop prices, unseasonal rains and declined rabi output. The Indian commercial vehicle industry has strong correlation with the agricultural growth,
infrastructure development and the mining industry and is cyclical. The Company's presence in all the segments of auto industry will largely mitigate the segment specific risks. The Company plans to develop additional products to maintain its growth plans. The Company has also put in place initiatives to improve product quality to support the growth plans. The Rupee depreciated significantly in the last year as against the US dollar. There may not be a major recovery in 2015-16, nor a further substantial depreciation. The Company is taking suitable forex cover to mitigate the risk in foreign exchange fluctuations. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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