Honeywell Automation India Ltd. - An Analysis

Recommendation : HOLD
December30, 2010.

Honeywell Automation India Ltd. is a debt-free company. Reserves and Surplus have increased by 12% at 483.29 crores in the June quarter from 429.81 crores in the December quarter last year. Capital Employed has increased by 13% to 464.98 crores in June quarter from 410.59 crores in  December quarter.

Income from Operations have increased by 29% to 364.89 crores in the September quarter from 282.31 crores in the corresponding quarter last year. Operating Profit Margins dropped down to 9% in this quarter as compared to 17% in the same quarter last year. The breakdown of Quarterly Financial Statements is given below.

If we compare things annually, Income from Operations in 2010 increased 17% to 1174.56 crores from 1001.52 crores in 2009. Operating Profit Margins for financial year ending December 2009 was at 16% as compared to 11% for December 2008. The breakdown of Annual Financial Statements is given below.

Return over Capital Employed (ROCE) for the current year ending six months in June quarter is coming out to be 14% as compared to an ROCE of 46% in the whole financial year of 2009-10, which starkly indicates towards dropping margins.

Cash Conversion Cycle (CCC) for the current year ending six months in June quarter is coming out to be -32 days as compared to -12.58 days for the whole financial year ending March 2010. The improvement seems to be because of their better control over sales outstandings.

Total Assets per Share of the company is coming out to be Rs. 559.24. Earning per Share of the company for the past four quarters is coming out to be Rs. 129.26. Current Price of the scrip is Rs. 2364.05. Trailing P/E of the company is coming out to be 18.29.

Equity Section notes that there is a remarkable improvement in their Cash Conversion Cycle since December 2009 on account of their improved control over sales outstandings. But, it can't also be ignored that their Operating Margins have dropped quiet significantly on account of increased raw material prices and Equity Section expects the pressure on the raw materials prices to continue further. Therefore, Equity Section issues a HOLD rating on Honeywell Automation India Ltd. until further results. Equity Section will also take this scrip on its watchlist.

Discalimer : Equity Section doesn't hold this scrip.