Hindustan Dorr Oliver Limited is an Indian EPC company having its core business activities in providing engineered solutions, technologies and EPC installation in Liquid-Solid Separation applications. The 4 broad verticals where the company operates are Mineral Beneficiation, Environmental management, Chemical and Fertilizers and Pulp and Paper processing.
IVRCL took over the management of Hindustan Dorr Oliver in mid 2005 and things have clearly changed for the good. The net profit margins have improved from 1.4% to more than 7%, while the OPM has gone up from 1.82% to 11.24%. The returns on the capital employed have gone up from 9% to an impressive 24%. All these changes have been done over the period of the last 3 years. The debt to equity ratio is at a moderate .32
Mineral Beneficiation accounts for more than 60% are of its revenues and are seen as a major growth driver for the company. Mineral Beneficiation contains a variety of processes where the extracted ore from mining that can be separated into minerals and waste. The minerals coming out of the process can be directly used or processed further. Mineral Beneficiation is the HDO is the pioneer in Mineral Beneficiation technology, when you consider India.
It is only now that companies like Elecon engineering are planning to foray into Mineral Beneficiation and HDO has a clear lead in this segment. HDO enjoys leadership in more than 70 different metallic and non metallic mineral processing industries. HDO has major contributions in processing of Alumina, Iron-ore, Uranium, Coal, Copper, Lead, Zinc…. HDO has executed projects for almost all majors like NALCO, HINDALCO, BALCO, MALCO, Vedanta… The recent inflow of orders from Vendanta group and Uranium Corporation of India and the huge investments that are coming into the resources sector are only pointers that HDO has a very bright future.
The Environmental management vertical currently contributes for around 25% of the revenues and it is expected to grow at a more than healthy %. Under this vertical, the company operates in Water / Waste Water and Industrial Effluent Treatment systems and offers integrated solutions for customer satisfaction. One can really estimate how this vertical would shape up by just looking around at the various water treatment / sewage treatment facilities that are being set up.
HDO recorded total sales of around 500 crore for the just ended financial year and they currently have an order book of around 1450 crore. The current market cap of the company is just above 300 crore and you should remember that this 300 crore company is the industry leader and a pioneer in the space of Mineral beneficiation. Some of the recent major order wins are HPCL – Mittal Energy order worth 127 crore, Vedanta Group order worth 66 crore, Uranium corporation of India Limited order worth 441 crore. The size of the order and the calibre of the awardees clearly shows what the future holds for a 300 odd crore company. One can expect an impressive growth of 50%+ over the next 2 or 3 years.
To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com