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Honeywell Automation India 4QCY2013 performance highlights and results update

February 10, 2014, Monday, 15:50 GMT | 10:50 EST | 20:20 IST | 22:50 SGT
Contributed by Angel Broking


Honeywell Automation India Ltd (HAIL) reported a mixed set of numbers for 4QCY2013. Its top-line reported a yoy dip of 0.4% to Rs.452cr, 14.0% lower than our estimates of Rs.526cr. The EBITDA dipped by 18.8% yoy to Rs.42cr but was better than our expectation of Rs.32cr, while the EBITDA margin contracted by 213bp yoy to 9.4%, for the current quarter. On the back of flat growth in top-line coupled with poor operational efficiency, the net profit dipped by 19.2% yoy to Rs.29cr while the margin came in at 6.4%.
 
 
Manufacturing growth to drive volume
 
Assuming the Indian GDP to grow at 5.2% and 5.8% in CY2014E and CY2015E, the manufacturing sector is expected to grow at 8.0% and 9.2% respectively. There is therefore an expectation of resumption in investment expenditure by varied sectors like the process industry, construction industry and automation. HAIL, with its presence in these varied industries, is poised to gain traction from the revival in the economy. Hence, we expect the rebounding economy to provide push to the company’s volume and revenue.
 
 
Outlook and Valuation
 
We expect HAIL’s revenue to post a CAGR of 6.3% to Rs.1,927cr over CY2013-15E. The EBITDA and PAT for the company are expected to grow at a CAGR of 7.7% and 8.4% respectively over CY2013-15E. At the current market price of Rs.2,590, HAIL is trading at a PE of 22.3x and EV/Sales of 1.0x for CY2015E. Considering the consistent poor performance of the company coupled with prevailing economic slowdown, we maintain our conservative stance and Neutral rating on the stock.