Himatsingka Seide soars 8% to hit fresh 52-week high on stable outlook

HSL's operating margin will stabilize at 18-22 per cent this fiscal year, compared to 12.8 per cent in fiscal 2023, aided by better capacity utilisation and easing of cotton prices, said CRISIL

Shares of Himatsingka Seide (HSL) surged 8 per cent on the BSE to hit a 52-week high of Rs 183.95 in Friday's intra-day trade amid heavy volumes supported by a healthy business outlook. 

The stock surpassed its previous high of Rs 175 touched on November 17. The average trading volumes on the counter jumped 1.5 times today.

A combined 2.5 million equity shares had changed hands on the NSE and BSE till 11:07 AM. In comparison, the S&P BSE Sensex was flat at 66,019.

HSL is a vertically-integrated global textile major that designs, develops, manufactures, and distributes a suite of textile products.

It has a diversified portfolio spanning across made-up bedding products, drapery and upholstery fabrics, and towels.

Spread across North America, Europe and Asia, the Group operates amongst the largest brand and private label portfolios in the home textile space.

HSL’s margins were impacted by the Covid-19 pandemic in the first half of fiscal 2021 and by inflation in the second half of fiscal 2022.

Strong headwinds in the textile industry, with differential in international and domestic pricing of cotton, coupled with supply chain challenges, impacted captive demand and led to the lowest margin of 12.8 per cent in the second half of fiscal 2023

However, with correction in domestic cotton prices and restocking by big box retailers in key overseas markets, HSL recorded an operating profit (earnings before interest, depreciation, tax and amortisation or EBITDA) of Rs 308 crore in first half of fiscal 2024 and reported a higher margin of roughly 21.5 per cent for this period as compared to 3 per cent in the same period last fiscal.

HSL’s revenue is likely to grow by 8-10 per cent this fiscal year propped by strong export demand, while operating margin will stabilize at 18-22 per cent, compared to 12.8 per cent in fiscal 2023, aided by better capacity utilisation and easing of cotton prices, according to rating agency Crisil Ratings.

Further, net cash accrual is expected to increase to Rs 270-280 crore in fiscal 2024, from Rs 114 crore in fiscal 2023, as per the rating agency. 

HSL also intends to infuse equity in an electricity generating company (primarily renewable energy) as per group captive norms applicable for the state of Karnataka, to minimise its energy cost, reliance on coal for generation of steam and meet its targets under the environmental and social goals.

HSL has launched its products under the Himeya brand in Indian market to boost its participation in local markets in the medium term. 

CRISIL Ratings has revised its outlook on the long-term bank facilities of HSL to ‘Stable’ from ‘Negative’ and has reaffirmed the rating at ‘CRISIL BBB+’. The short-term rating has been reaffirmed at ‘CRISIL A2'.

Revision in the outlook reflects the improved business risk profile and comfortable financial risk profile.

Operating performance has picked up in the second half of fiscal 2023, with easing of supply chain challenges and drop in domestic cotton prices below international prices, making domestic home textile products competitive in the global market, it said.

With the expectation of a healthy cotton crop for the current cotton season, this trend should sustain in fiscal 2024.

Also, demand in the second half of the current fiscal will be supported by festive demand from the US, which along with steady consumer discretionary spending, will ensure a constant order flow from big box retailers, it added.