Hyderabad Industries, the market leader in asbestos-based roofing industry

Note: Asbestos is banned in some 50 countries because it causes incurable diseases.

Incorporated in 1946, Hyderabad Industries Limited (HIL) is the flagship company of C. K. Birla group of company. Company’s manufacturing units are situated in Hyderabad, Faridabad, Jasidih, Dharuhera, Thimmapur, Vijayawada, Chennai, Thrissur, Wada, Sathariya and Balasore. HIL is the market leader in asbestos-based roofing industry under the brand name of “CHARMINAR”.

Both the division of the company has performed exceptionally well. Building Products division is high margin business of the company, contributing 95% to sales in FY09. Revenues from Building products increased by 28% and Thermal Insulation Products increased by 29% on Y-o-Y basis in FY09. PBIT for Building products increased massively by 210%, however PBIT for thermal insulation product division declined by 2%.

During the quarter ended on 31st Dec, 2009 the net sales of the company reported an increment of 13% on y-o-y basis to Rs 146.01cr as against Rs 129.64cr during the corresponding quarter last year. The operating profit for quarter increased by massive 65.44% to Rs
27.43cr against Rs 16.58cr, largely on account of increased revenue of the company.

Net profit for the quarter rose by an impressive 120.45% y-o-y basis to Rs 14.55cr as against Rs 6.6cr during the corresponding quarter last year. The current price of Rs 54 discounts the company's Q3 December 2009 annualized EPS of Rs 96.36, by a PE multiple of 6.18.

Hyderabad industries is the market leader in asbestos based roofing industry with installed capacity of 764500 MT and market share of around 20.5% and is also largest manufacturer of calcium silicate, insulation blocks, pipe sections and jointing for gasketting.

The cement products manufacturers, manufactures value-added utility building products like Fibre Cement Sheets, Autoclaved Aerated Cement Blocks, Aerocon Panels and Fibre Cement Boards. There are 17 major players in this industry with about 63 manufacturing unit. Everest industries, Hyderabad industries, Ramco industries and Visaka industries are the major domestic players.

The efficiency of the companies in this sector is apprehended by the ability of the firm to source inputs at reasonable cost as well as the scale of operation. The cement product industry especially the asbestos cement manufacturers celebrates thrust given by the government on rural infrastructure – especially on rural housing through Indira Awaas Yojana which is a positive indicator because cement product sector derives sizeable portion of demand from rural housing sector and rest from industrial sheds. So the players with strong focus on rural segment like, Everest industries and strong brand s are better placed. Post monsoon the demand in northern market may continue to be strong driven mainly by the common wealth game related development activity.

Union Budget 2009-10 has increased the excise duty incidence on cement products from 4% to 8%. But with speedy implementation of infrastructure and development projects, it will help Cement and Cement Product sectors industry to sustain its strong demand. Cement is the major input used by the industry especially the asbestos cement manufacturers. According to CMIE (Center For Monitoring Indian Economy) cement prices are expected to weaken in second half of 2009-10 as 35 million tonnes of fresh cement capacity will come on stream, which will put pressure on realizations of company.

A total addition of 270,000 MT in the sheeting industry during the year along with 4.5% growth rate in sheeting industry has put pressure on pricing and sales volume. Chrysotile asbestos sheets which is one of the major raw material used in cement product industry is majorly imported from china and brazil, so depreciated Indian rupee will hit industry margins.

Growth for Cement product industry depends on Real estate and construction and nfrastructure relted activity. With the initiatives made by the government in various infrastructure projects, road networks and housing facilities, coupled with the housing sector boom and urban and rural development, high growth in the cement product industry is expected in forthcoming years.

Fibre cement sheets are gaining popularity because of their strong physical properties as compared other roofing materials. The fiber cement industry is estimated to grow at 5% for financial year 2009-10.

Asbestos cement industry is growing at 10-12%. Industry was relatively untouched by global turmoil but industry may find it difficult to survive with campaigns against asbestos products. If asbestos loses out then companies with diversified product portfolio with be able to outperform.

Cement is a necessary component of infrastructure development and a basic raw material for the construction industry. The total utilization of cement in a year is used as an indicator of economic growth. India is the world's second largest producer of cement after China, with cement companies adding nearly eight million tonnes (MT) capacity in April 2009, taking the total installed capacity to 219 MT.

Hyderabad industries limited is leading manufacturer of fibre cement sheets in india with an estimated market share of about
20.5%

HIL outperformed fibre cement sheet industry with 7% growth as compared to 4.5% growth of industry.

Company is making continous efforts to increase production capacity of of existing plants so as to retain significant share in the market.

In order to expand its product reach company is assessing strategic locations to set up new plants

With the growing demand for thermal insulation products, company is assessing development of new applicatons and strategic acquisition to increase market size.

During FY 2009 Company gross revenue registered a growth of 27% to Rs 663.97 crores from Rs 523.47 crores previous

Fibre cement sheet being the main product accounts for about 85% of company¡¦s sales. Production and sales (quantity) registered a growth of 1% and 7% to 668955 MT and 698119 MT respectively for FY 2009

New units at Balasore & Vijaywada for fibre cement sheets and Surat for AAC plants getting streamlined will improve margins of comapny.

Production and sales (quantity) of thermal insulation products have increased by 19% and 21% to 4616 MT and 2728 MT respectively for FY 2009. With the success of Green Building products and sucessful expansion taken by the company we expect further growth in this product line.

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