Stock Review: HSIL

This stock has got a PE rating rather than an only expansion in terms of earning per share (EPS). The stock trades at a PE of over ten times, its next year EPS estimates. But I think this stock definitely deserves this kind of re-rating.

Now looking into the real estate prices, a 1500 sq feet flat for a salaried person is a dream. So, over last two years, people have gradually shifted for a consumption story by renovating their existing homes. An that is making HSIL a clear cut beneficiary.

Looking into their results this time from a Rs 9 EPS on a consolidated front has jumped to Rs 13. The company has actually started vertical expansions across its segments. Apart from that, the company has also forayed into chrome plated fitting and is going to benefit in the long-term. They have actually acquired Havells brand Craptree which now they will be selling under a different name Benelave.

The company has got good understanding with other players in the industry, premium players into the market of Europe. The stock definitely deserves the PE going forward and even get extended to 14 to 15 multiples.

It is a difficult call for me to actually take a technical perspective because the stock has been hitting 52-week high. The stock is right now languishing around at Rs 160. Thanks to technical charts, this can even cool down to the support levels of Rs 137-138. But I feel this is one stock which will definitely do well in years to come.

When I took a call on to this stock at Rs 35, I have a very modest target in terms of EPS for the next five years of close to Rs 18 to 20. But the way the story has actually shaped out has forced me to actually increase the EPS estimate for FY2014 to close to Rs 22 mark.

If some one has patience for the next five-six years, the stock in terms of EPS can actually double or even triple from here. The way the brands have been re-rated in our country, I think the stock can easily trade into that 15-18 PE multiple, in next three-four years.

The stock would be at least be Rs 350 to Rs 400 in less than four years. So, two-and-a-half times in four years, I think this is a portfolio bet. One should definitely invest a small quantity rather than buying a chunk and trading it. If someone keeps a small quantity and if the story shapes out, they will make humongous return compared to if they trade out and miss out on the story like HSIL in the longer term.