HP Adhesives Limited has wide range of consumer adhesives and sealants such as PVC, cPVC and uPVC solvent cement, synthetic rubber adhesive, PVA adhesives, silicone sealant, acrylic sealant, gasket shellac, other sealants and PVC pipe lubricant which are sold across India, through an extensive distribution network of distributors, and exported also to several countries, through network of distributors and direct customers. Its also manufactures these products for selected large PVC pipe manufacturing companies under co-branding or private label on order basis. Apart from the above products, they also sell ancillary products like ball valves, thread seal and other tapes and FRP products for drainage and architectural solutions that are distributed along with the products to the end-customers through the distribution network. The aforesaid adhesives and sealant products have applications in multiple industries such as plumbing and sanitary, drainage and water distribution, general purpose building/ construction and interior operations as well as for glazing operations, woodwork, footwear, automotive, foam-furnishing and other varied industries. As of September 30, 2021, our distribution network comprised of 4 depots and more than 750 distributors who cater to more than 50,000 dealers in India. Its sales team works closely with the distributors and end-appliers to obtain their insights and feedback about the upcoming trends in the industry which enables them to formulate an effective strategy for product development, sales, marketing and pricing. As of September 30, 2021, company is operating out of the manufacturing facility located at Village Narangi, Raigad (Maharashtra) which is a multi- product manufacturing facility. The manufacturing facility is located in close proximity to Jawaharlal Nehru Port Trust (JNPT) from where they receive the supply of imported raw materials as well as from where they export to international market. During the FY 2020-21, they have sold the products in 21 countries namely, Bahrain, Bangladesh, Ghana, Greece, Iraq, Kuwait, Mauritius, Nepal, Nigeria, Oman, Philippines, Qatar, Republic of Malawi, Saudi Arabia, Taiwan, Turkey, UAE, Uganda, UK, USA and Yemen. They intend to expand the manufacturing capacity at Village Narangi, Raigad, Maharashtra to cater to the growing demand for several product categories. As per financial performance, HP Adhesives Limited has posted total income/net profits of Rs 87.97 Cr / Rs 4 Cr (FY 19), Rs 97.90 Cr / Rs (4.67) Cr (FY20) and Rs 123.87 Cr / Rs 10.05 Cr (FY21) and Rs 72.73 Cr / Rs 3.10 Cr (H1 FY22). So company has posted good growth over last couple of years. The loss in FY20 was due to some exceptional items. Company has posted an average EPS of Rs. 3.19 and average RoNW of (18.38)% for last 3 fiscals. Issue is priced at a P/BV of 10.38 as per NAV of 26.39 on 30.09.21. If we attribute latest earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 50.05 and if we annualise H1 FY22, then on fully diluted equity post issue P/E is 81.15 which looks aggressively priced. As per RHP, Comparison between listed peers are shown in above table, but in reality Pidilite is very giant player and not comparable. On BRLM's front, one lead managers are associated with this IPO, and have handled around 6 IPOs in last three fiscals. From last 6 IPOs, one is opened below issue price and remaining are opened above issue on the day of listing. As of now, two are trading below issue price and other are trading above issue price. ( As on 30.11.21) As per financials, HP Adhesives Limited has shown good growth, RoNW 79% and P/E is respectively 50 and 81 as per FY21 and annualised FY22 earnings, which looks aggressively priced with respect to the size of company. As infrastructure development is increasing, demand for adhesive products are increasing and the sector is expected to grow at good rate in future also, but there is tough competition from unorganised players. Performance of BRLM is average. So we give NEUTRAL rating to this IPO and risk taking investors may apply for this IPO.
✍️ Post a Comment