Recommendation from Ceramics & Hospitals Sector

DSIJ selects two aggressive stock picks in every issue, with a 15 day horizon based upon the bullish trend during that period. For this issue, we are recommending  companies from the Ceramics and Hospital sectors -

HSIL

Sanitaryware maker HSIL is entering the consumer products segment in its  diversification bid. The company had approved capex of Rs 217 crore for setting up CPVC/UPVC pipes facility for Rs 105 crore and Rs 112 crore for producing security caps and closures for protection of products from counterfeiting. Both the capex will be incurred at Telangana to start from H2FY16 and expects to be commissioned by end of FY17. In Q2FY16, net profit increased by 27 per cent to Rs 24.3 crore on the back of lower finance costs. Finance costs in Q2FY16, nearly halved to Rs 9.2 crore as against Rs 18.9 crore in the same quarter of the last fiscal. It may be added here that six months back, the company has forayed into the water heater segment under a co-branded marketing arrangement with French entity, Groupe Atlantic. Currently, the stock is trading at 18.6x PE on TTM basis with EPS of Rs 16.4 per share.

APOLLO HOSPITALS ENTERPRISE

Apollo Hospitals’ Q2FY16 consolidated revenue, EBITDA and PAT grew 18, 10 and 24 per cent respectively on a year on year (YoY) basis. Its healthcare services revenue grew 8 per cent YoY (excluding new hospitals of 5 per cent) as some of the clusters witnessed heightened competitive intensity and Stand-alone Pharmacy (SAP) revenue grew 33 per cent YoY. While EBITDA margin for SAP improved around 40bps YoY to 3.7 per cent. Healthcare Services’ margin was largely stable at around 22 per cent. The company expects margins to grow further in coming quarters. Going forward, the chain plans to invest Rs 700 crore into the main business, the hospital will also increase its bed capacity from current 1,500 beds to 2,200 beds. The capex will mostly be from internal accruals and a marginal portion from debt. The Nova and Assam acquisition have demonstrated Apollo's willingness to opt for the inorganic route for expansion through localised targets with good capability.