Buy Himatsingka Seide - Nirmal Bang

Himatsingka Seide Ltd. (HSL) profitability got impacted in the last four years on account of delay in commissioning of new bed linen business at Hassan SEZ, acquisition of 80% stake in Divatex Home Fashions Inc., New York, in July 2007 (distribution company) at peak time, slow down in US economy, volatility in raw-material prices (raw silk and cotton) and long open derivative contracts.

To combat the crisis, the company had introduced product mix changes, addition of new customers, enhancing focus on the brands, launching value added products and higher capacity utilization will lead growth in the sales and improvement in margins. The last leg of derivative contract also got closed in August 2012 which we believe will result into the stable financials going forward. The improvement in drapery and upholstery capacity utilization and improvement in distribution business will be the key driver of improvement in margin.

We initiate coverage with a 'BUY' recommendation and a target of Rs.54 per share (10xPE FY14E), an upside of 32%.

Source : Equity Bulls

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