Buy Hindware Home Innovation Ltd For Target Rs. 375 By Choice Broking Ltd
Management Strategy Starts to Make an Impact
We maintain our BUY rating on HINDWARE with an increased TP of INR 375 (from INR 325 earlier). We factor in: 1) FY25-FY28E Revenue/EBITDA CAGR of 12/30% for Bathware Segment, 2) FY25-FY28E Volume /Revenue /EBITDA CAGR of 12/12/18% for Piping Segment, driven by expected improvement in Real Estate and Infra activity, and 3) FY26E/FY27E/FY28E EBITDA margin of 7/8/10% for Consumer Appliance Business which implies a rebound to FY23 levels due to focus on profitable product categories. Consequently, we arrive at FY25-FY28E consolidated Revenue/EBITDA CAGR of 12/48%.
We now value HINDWARE on 1 year forward (blend of FY27E-FY28E) EV/EBITDA multiple of 9x which we believe is conservative given significant turnaround expected in ROCE from 1.4% in FY25 to 17.0% by FY28E. We do a sanity check of our EV/EBITDA TP using implied P/BV, and P/E multiples. On our TP of INR 375, FY27E implied PB/PE multiples are 3.4x/31x. Slowdown in construction activities due to external factors and sudden fall in PVC/CPVC prices as a result of various global dynamics are risks to our BUY rating.
Demerger value unlocking is not considered in our INR 375/sh TP
HINDWARE announced the de-merger of loss making Consumer Appliances Business in Apr 2025. We have not factored in the benefits of the composite scheme of demerger i.e. 1) revising the valuation multiple higher of Building Products Business, and 2) ascribing a positive value to the Consumer Products Business as the proposed demerger scheme receives the requisite regulatory approvals. Based on 1 and 2, our proforma valuation workings (Exhibit 4) indicate a valuation of INR 415 per share for the Building Products Business and INR 50 per share for the Consumer Appliances Business. It could take 6 to 12 months for all the regulatory approvals to be completed.
Q1FY26 Review: Improvement in Bathware Segment is Encouraging
* Consolidated revenue came in at INR 5,312Mn, (vs CIE est of INR 6,246Mn), down 11.5%YoY and 24.0% QoQ.
* Consolidated EBITDA came in at INR 488Mn, (vs CIE est of INR 487Mn), up 13.3/19.2% YoY/QoQ. EBITDA margin improved by 201/339bps YoY/QoQ to 9.2%.
* Despite the revenue miss, EBITDA came in higher than expectations, which is encouraging
* HINDWARE reported exceptional loss of INR 494.9Mn (one-off), due to discontinuation of certain high loss making product categories in Q1 FY26 and a JV loss of INR 41.4Mn.
Segmental Results: Bathware & Consumer appliances operational performance is impressive
* Revenue from Bathware segment came in at INR 3,410Mn, up 14% YoY but down 5% QoQ and EBITDA margin came in at 12.6%.
* Pipes segment reported volume de-growth of 21% YoY to 8.0KT and revenue was down by 27% YoY to INR 1,190Mn (impacted due to lower realisation). EBITDA margin declined by 80/383bps YoY/QoQ to 5.9%.
* Revenue from Consumer Appliances segment came in at INR 710Mn, down 36/23% YoY/QoQ and EBITDA margin came in at 14% vs 3% on 1QFY25.
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