Buy Hindware Home Innovation Ltd For Target Rs. 430 By Choice Broking Ltd
Management Strategy Starts to Make an Impact
We maintain our BUY rating on HINDWARE with an increased TP of INR 430 (from INR 375 earlier). We factor in: 1) FY25–FY28E Revenue/EBITDA CAGR of 13/30% for Bathware segment, 2) FY25– FY28E Volume /Revenue /EBITDA CAGR of 11/13/20% for Piping segment, driven by expected improvement in Real Estate and Infra activity, and 3) FY26E/FY27E/FY28E EBITDA margin of 8.6/8.6/9.3% for Consumer Appliance business, which implies a rebound to FY23 levels owing to focus on profitable product categories. Consequently, we arrive at FY25–FY28E consolidated Revenue/EBITDA CAGR of 13/52%.
We now value HINDWARE on 1–year forward (blend of FY27E– FY28E) EV/EBITDA multiple of 9x which, we believe, is conservative given a significant turnaround expected in ROCE, from 1.4% in FY25 to 19.1%, by FY28E. We did a sanity check of our EV/EBITDA TP using implied P/BV and P/E multiple. On our TP of INR 430, FY28E implied PB/PE multiples is 3.2x/19x. Potential slowdown in construction activities due to external factors and possible sudden fall in PVC/CPVC prices as a result of various global dynamics are risks to our BUY rating
Demerger value unlocking not considered in our INR 430/sh TP
HINDWARE, in April 2025, announced the demerger of its loss-making Consumer Appliances Business. We have not factored in the benefits of the composite scheme of demerger, that is, 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 requisite regulatory approvals. Based on Points 1 and 2, our proforma valuation workings (Exhibit 4) indicate a valuation of INR 480 per share for the Building Products Business and INR 60 per share for the Consumer Appliances Business. It could take 6 to 12 months for regulatory approvals to come through.
Q2FY26 Review: Improvement in KPIs across the board
? Consolidated revenue came in at INR 6,763Mn, (vs CIE est of INR 6,509Mn), up 7.4%YoY and 27.3% QoQ.
? Consolidated EBITDA came in at INR 564Mn, (vs CIE est of INR 754Mn), up 89.9/15.7% YoY/QoQ. EBITDA margin came in at 8.3% (+362/-84bps YoY/QoQ).
Segmental Results:
? Revenue from Bathware segment came in at INR 3,970Mn, up 10/16% YoY/QoQ. EBITDA margin came in at 10.8%.
? Pipes segment reported volume growth of 14/48% YoY. Revenue at INR 1,960Mn is up 5/65% YoY/QoQ to (impacted due to lower realisation YoY). EBITDA margin declined by 70/+20bps YoY/QoQ to 6.1%.
? Revenue from Consumer Appliances segment came in at INR 840Mn, up 2/18% YoY/QoQ. EBITDA margin came in at 8% vs -9% on 2QFY25.
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