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HP adhesives IPO, should hp adhesives buy, sell or hold

 What should you do in HP adhesives stock Buy, sell or hold?

After such a long time One IPO came into the Indian stock market in which many people were aware that it may get risky to invest in this IPO but still many of them have applied for it. Now On the listing day, People were confuse that what to do next? Should you hold or sell HP Adhesives after IPO listing? Should you buy or sell HP Adhesives after IPO listing?  Today we will try to find out the best answer of these questions. First of all we will understand the business model of HP Adhesives ltd & some positives & Negative points of the company.





Question:

What are the positive points of HP adhesives?

Answer:  

HP Adhesives Business comparison with its peers

In the Adhesives sector, There are not much companies are listed into the Indian stock market. As per company management HP Adhesives has directly comparison with Pidilite Industries ltd. But personally we do not think like this because Pidilite Industries is one of the best company in India having strong branding position in the India & Company size of the HP adhesives is too small as compared to Pidilite Industries. Less competition with small companies will give edge to the HP adhesives products

HP Adhesives company has wide Products range:

HP Adhesives is a manufacturing company having large range of consumer adhesives and sealants. In the products list of the company different range of products includes like synthetic rubber adhesive, PVA adhesives, acrylic sealant, gasket shellac, silicone sealant, PVC, cPVC, and uPVC solvent cement, other sealants as well as PVC pipe lubricants. Demand of all products will always be in focus because company has focus on those industries which will always be in focus in different industries of India.

Use of Company products in different industries of India:

The demand of company products also use in many industries like, drainage and water distribution, plumbing and sanitary ,general purpose building  & construction, interior operations & for glazing operations, footwear, automotive, woodwork, , foam furnishing etc. After deep research on company products we also came to know that products of this company also required in ancillary products like ball valves, thread seals, and other tapes & architectural solutions as well as FRP products for drainage.

Distributors & Dealers network of HP adhesives Ltd:

Company has strong presence of business in states likeKolkata, Bengaluru, Indore & Delhi. Also, HP adhesives Ltd has strong distributors network with more than 750 distributors those cater to more than 50,000 dealer’s network in India. One of the best thing about the company is that it has own manufacturing facility which is located at Village Narangi, Raigad (Maharashtra). As per company financial results of 2020-21, company had sold its products in 21 countries. Strong Dealers network & good presence of its distributors in big states of India is giving better future outlook to company.

 

Financial Performance of HP adhesives:

If we will calculate the last 3 financials years performance of the company then we can say that company had performed average. In FY 19 Net profit of the company was 4cr against total turnover of nearly 88cr. In FY 20, Company has reported net loss of 4.67cr against total turnover of nearly 98cr. In the financial year 2021, company had reported net profit of 10cr against turnover of 123.8cr. As per company latest financial report in the first half of the FY22 Company had reported net profit of 3.1cr against 72.7cr turnover. In the last 3 financial years, company had posted an average EPS of Rs. 3.2 per share & P/BV of 3.3.

As per previous results of the company turnover is increasing but there is not much jump in the net profit. This is may be due to the competitive price in the market. In the segment HP adhesives is operating its business, there are more competition from local manufactured products.

Dividend Track record of the HP Adhesives:

Company had good dividend track record because in the last 3 financial years, FY19, FY20 & F21, company has paid 30%, 50% & 30% dividend respectively it also includes ongoing fiscal. It is also expected that company will carry forward this dividend policy in the future to attract more investors for the company.

Question

What are the negative points of HP Adhesives Company?

Answer:

1)I FY20, As per company management, due to exceptional onetime adjustment and other provisions in the balance sheet cleaning exercise which looks some time very obvious, company had provided nearly 11 cr. of expenses. Therefore in the first half of FY22, spiralling prices of raw materials that could not be passed on to customers attributed. It was a setback for the company.

3) Company products are getting big competition from the local made products & Company is still require to do brand position in the coming year to give any kind of competition to big player like Pidilite Industries. In this situation, company requires more funds & expansion which will not be done in few months or few years.

Questions:

Should you hold or sell HP adhesives stock?

Answer:

As per our above calculation & fundamental analysis of HP Adhesives Company, We can say that HP adhesives Stock is for investors having high risk taking ability with moderate returns expectations. There is nothing bad with the company fundamentals but the only concern is that its products will face big competition from the local market as well as from the big brands like Pidilite industries. This competition may affect the net profit of the company & we may see some fluctuations in the turnover as well as net profit of the company. Therefore if investors have risk taking ability then they can hold HP adhesive stock for long term point of view 1 to 2 years point of view. If you are making profit on HP adhesives IPO listing then you will have two options:

1) Book Profit on higher levels & wait for correction to come in the stock

2) Trail your stoploss with 10% of profit from IPO price band

Question:

What are the long term targets of HP adhesive stock?

Answer:

If you are risky investors then you may accumulate the HP adhesives stock for long term price targets of 345rs+ in 1 to 2 years. It is better to start accumulate the stock after profit booking. By this way your risk will decrease & then you may wait for above price target.

Recommendation on HP adhesives stock:

Only high risk taker investors should jump into the stock on higher levels, otherwise wait for some correction or raise your stop losses & lock your profit. As per our research HP adhesives has average fundamentals. But we may increase or decrease Price targets of HP Adhesives stock after analysis the financial performance of the company in the coming quarters & years.

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