HLE Glascoat: Strong play on pharma & chemicals capex

11 Aug 2023 , 11:23 AM

• HLE Glascoat is a direct play on the growing Pharma and Chemical capex globally as a process equipment supplier. The company enjoys 50% share in the Filtration & Drying (F&D) Equipment market and ~30% share in the Glass Lined Equipment (GLE) market, with a strong track record of execution in terms of revenue growth.
• Acquisition of Thaletec (the largest GLE supplier in the Germanspeaking areas in Europe) has provided access to an advanced product portfolio and know-how. Focus is on expanding the geographical reach for these across North America and in India. At the same time, India operations are now ready to manufacture part of these products to reduce cost and target more cost-conscious customers as well.
• The recently announced acquisition of Kinam Engineering opens up the domestic Heat Exchanger market with a complementary offering for Pharma and Chemicals. It should benefit from HLE’s bandwidth and market presence. At 9x FY23 PBT, multiple is attractive.
• FY22-23 has seen impact from volatile RM (steel) prices on volumes, primarily on margins. Rs5.5bn order book (6-month execution) as at end-Q1 and stable steel prices should support uptick in margins. Including gains from new products, new markets and manufacturing synergies, analysts of IIFL Capital Services would expect earnings to grow at 20% Cagr over FY23- 25.