The HSIL stock currently trades at a price-earning multiple of only 13, leaving enough scope for a sharp appreciation in the medium-to-long term. The scrip could come under pressure in the short-term as the HSIL's performance in third-quarter is not likely to be encouraging (the glass plant is partially closed for maintenance). However. this would provide investors with an ideal opportunity to enter the stock.

The high reserves position of Rs 84.48 crore and a low equity base of Rs 5 crore makes the company a bonus candidate. A bonus issue will also solve the problem of low floating stock that currently ails the counter. To improve liquidity, the company may go in for a private placement of shares. HSIL is India's leading sanitaryware and container glass manufacturer. At present, the company has a 41 per cent share in the sanitaryware market and an annual capacity of 32,000 tpa. The company is also a market leader in the container glass segment with an impressive list of multinational customers.

To maintain its numero uno position, HSIL has charted a growth strategy. In sanitaryware the company plans to lay more stress on high value products. ``We are phasing out our low-end products as we want to position Hindware as a premium brand and use the Raasi brand in the low-end, price sensitive market,'' says R B Kabra, president HSIL.

HSIL's acquisition of the Raasi brand in 1999 has given it a foothold in the rural markets as well and helped the company bag numerous Government orders. HSIL also plans to launch new products every quarter. The company will be adding more colours to its present range as coloured product have higher margins. Besides, the company also hope to better its presence in the south, where EID Parry's Parryware is a household name. ``Our strategy is to edge out competition by putting pressure from both ends -- on the higher-end by Hindware and, on the lower-end, by Raasi,'' says Kabra.

HSIL is also looking at increasing trading activities to offer customers a wider range. In trading, the company will look at made-to-order products as well as importing and selling. HSIL recently entered into strategic tie-ups with Grohe AG of Germany and Masco Inc of USA for designer products. To give trading activity a big push, the company plans to have a separate marketing division to market such products. Over the next three to four years, HSIL expects to generate more than 25-30 per cent of its revenue through trading activities. A wide dealer network of over 600 would help company achieve this objective, says Kabra.

In the glass division, the company has added fresh capacities of 250 tonnes per day. The new furnace has already been lit up and commercial production is expected to begin by the end of this month. However, HSIL has closed the old glass furnace of 110 tpd for maintenance. This would mean that the full impact of higher capacities will get reflected only in the fourth quarter. At present, glassware accounts for 45 per cent of the company's turnover.

Post expansion, its share will rise to 50 per cent. In the next fiscal, the company plans to enhance the capacity of the Raasi plant by 5,000 to 12,000 tpa. Hindustan Sanitaryware is adding another 10,000 tpa capacity at its various plants. With these capacity additions, the company's capacity will rise from 38,000 tpa to around 48,000 tpa. The company is expected to report a 25 per cent growth in net profit on a 20 per cent rise in turnover. Net profit in the first-half ended September 30, 1999, stood at Rs 8.84 crore on a turnover of Rs 86.54 crore. The company's turnover was Rs 163 crore in the year 1998-99, of which 45 per cent was from the glass division and the rest from the sanitaryware division. This year's turnover is projected at over Rs 200 crore.