Himalya International - Processing The Right Profits

Himalya International (HIL) is a Delhi-based company and is India’s first frozen food enterprises. HIL’s primary business includes plantation and processing of mushroom and vegetables. The company also processes cheese and yoghurt and  manufactures nutritional supplements. Earlier HIL was only an exporter but sensing the growth prospects in the domestic market it has started to focus on domestic markets too. Its domestic sales during the last fiscal were Rs 30.43 crore. It has launched its product in the metro cities of India under the brand name Himalya Fresh.

HIL’s topline has witnessed a CAGR of 35 per cent over the past five years but going forward we believe it will chart a different growth trajectory. Recently HIL has signed a joint venture with a UK-based company called New World Paradigm (NWP), which has expertise in hydroponic and green houses. The company will use the know-how of NWP to increase the yield of its products by seven to eight times as compared to the traditional system. For this project it has earmarked an investment of Rs 100 crore in the next two years. The project will be funded in the ratio of their holding which stands at 51 per cent and 49 per cent between HIL and NWP respectively.

This know-how is expected to be used in its upcoming and existing facilities too. Apart from this, HIL has other capex plans too. Among these, the first is the capex of Rs 130 crore in Gujarat to produce 9,000 tonnes of yoghurt, 5,940 tonnes of processed cheese, 9,000 tonnes of mushrooms, and 15,000 tons of appetizers annually. The second is a planned capex of Rs 115 crore in Rajasthan to process almonds and cereals. The first project is being financed by the issue of warrants to the promoters, internal accruals, and term-loans of Rs 90 crore while the second project is to be financed by the EXIM Bank of USA at a concessional rate of 4.37 per cent interest under the India Infrastructure Facility.

Both the projects are expected to go on stream in the current year and the full effect of this capacity expansion is likely to reflect in its FY12 results. It is expected that by FY12 the company will post a topline of Rs 200 crore, which is an increase of more than two times on a yearly basis. As for the current financials of the company, for the quarter ending December 2010 its sales stood at Rs 25.50 crore, up 14 per cent on a yearly basis and the net profit increased toRs 6.85 crore, up 22 per cent over the same period last year.

For 9MFY11, HIL’s total sales were Rs 67.5 crore and it is in a very comfortable position to achieve its guidance of Rs 90 crore in sales for FY11. The current market price of the company discounts its FY11 expected earnings by just 4.55 times. Looking at the expansion plan of the company in the next couple of years and its presence in a high-growth area of food processing our advice to the readers is to invest in the stock with a time horizon of more than 18 months and expect a return of at least 50 per cent.