hyderabad industries....result highlights

Result highlightsHyderabad Industries Limited's (HIL) revenues during Q4FY2006 declinedby 1.65% year on year (yoy). However, on a like-to-like comparison, therevenues of the building division increased by 13.1% yoy to Rs107.32crore.The weak prices of asbestos cement and the strike at one of thecompany's plants affected the profitability during the quarter. Theoperating profit declined by 16.2% to Rs11.7 crore. The buildingproducts division reported a profit before interest and tax (PBIT) ofRs14.88 crore during Q4FY2006 as compared to Rs18.29 crore in Q4FY2005.Typically, the March-July period generates strong demand for asbestos.The company has also announced a price hike of 10% in the beginning ofApril. I, therefore, expect a strong Q1FY2007.The heavy engineering division (HED) has been hived off. However, thecompany reported a loss of Rs9.69 crore due to the discontinuedoperations of the HED.HIL is utilising its strong cash flows from its operations to prepay a large portion of its debt. The reduction in the debt has impacted the interest cost, which has declined by 70% to Rs0.78 crore in Q4FY2006.The company has reported a profit after tax (PAT) of Rs37.6 crore inFY2006 as compared to a net profit of Rs9.06 crore in FY2005. However, the FY2005 numbers include a one-time extraordinary write-off ofRs16.04 crore. I expect the company to report a net profit of Rs46.5 crore in FY2007 and of Rs52.9 crore in FY2008. The stock trades at 7.6x its FY2007 and 6.7x its FY2008 earnings. I maintain a Buy on the stock with a price target of Rs700