Shareholding Pattern: The promoters hold 52.61% (or controlling stake) while the general public holds 47.39% shares of the company. In the general category, the FIIs hold 4.69% and the corporate bodies 3.60% shares of the company.
Financials: The total turnover over the company for FY14 came out to be Rs.129.33 Cr and net profit of Rs.3.4 Cr. The EPS of the company for FY14, came out to be Rs.2.44 Cr. It is a dividend paying company at the CMP of Rs.19.55, the dividend yield is 2.58%. Moreover it is trading at a P/E of only Rs.10.80 while the industry P/E is 36.62. In the June, 2014 quarter, both the top and bottomlines came as flat, when compared on Y-o-Y basis. The company should end FY15, with an EPS of Rs.3-3.5. Now let us take a look at the Peer Group companies along with some financial data:
The Future Outlook :
The fortunes of the forging industry are on a rise - it has consistently recorded a notable increase in production, Capacity utilization and exports. Among the various segments of the forging business, it is the auto, mobile-related segment that is being talked about the most these days. Global automotive giants are looking at India as a competent supply base and are shopping for their components here. The industry, clearly, is one of our best bets to garner a substantial market share in the manufacturing sector, which as of now, is regarded as China’s stronghold. But while launching his 'Make in India' programme, Prime Minister of India announced a string of measures that can transform India into a manufacturing hub. This is positive for companies, like HMFL.
Indian forging industry is hoping for a revival in demand over the next two years after a prolonged slowdown in the market. The industry is expecting sales to increase by 8-10 per cent for FY15. Demand from exports and diversification into sectors such as oil & gas, defence and railways will drive sales said the Association of Indian Forging Industry’s (AIFI) annual report. Currently, the commercial vehicle segment is the highest contributor, (around 70%) in terms of revenues for the Indian forging industry, followed by tractor and multipurpose vehicles.
The estimated turnover of the Indian forging industry fell almost by 10% at Rs.18,500 crore in financial year 2014 from Rs.20,200 crore in the previous year with an overall capacity utilisation of around 57%. Automobile sector accounts for 70% of the forgings sales in the country. But in future it is likely to come down to 55%. Also, the revival of the mining sector in Orissa, Goa, Karnataka, and Andra Pradesh would immensely benefit the forging industry. The sector is also trying to reduce its dependency on the auto sector.
As the growth is visibly noticed and already having foot forward, Hilton Metal has decided to strengthen the following areas:
(i) Focus for increase in productivity and technology up gradation and modernization of the units to comply with global quality standards.
(ii) Acquire latest technologies with added emphasis on IT, CAD/CAM, and other forms of computer-based technologies to produce quality forgings conforming to international standards with best yields.
(iii) In order to reduce consumption of costly oil and power, as also to make industry environment-friendly, the company has decided to opt for energy audit.
Also, another point which is worth highlighting is: more than half of the turnover of the company is achieved through Exports and with INR now pegged at around Rs.61.36 per USD, the company would get benefited, a lot. Besides, the company is taking initiative and putting major thrust on exports. The company has policy to take part in exhibitions on or for Forging Products and Steel products held world-wide. This has helped the company since it could include quite a few new customers in its client base. The Company intends to explore the possibility of stock and sell in the US market especially in Oil and Gas sector. Various persons / agencies have been recruited to prepare the feasibility report.
Conclusion: Considering the points mentioned above, the scrip looks attractive at the CMP. Moreover, the market cap of the company is only Rs.24.33 Cr as against, FY14 turnover of Rs.129.33 Cr or in other words almost one fifth of its FY14 turnover---this gives much room for appreciation of its share price. The investors can buy the scrip at the CMP of Rs.19.55, for a medium term target of Rs.32-33.