Hind Rectifiers soars 18% as new plant kicks off commercial production

Shares of Hind Rectifiers soared 18 per cent to Rs 231.65 in Friday’s intra-day trade, after the company announced the start of commercial production of a new plant. In comparison, the S&P BSE Sensex was down 1.3 per cent at 12:40 pm.

“The commercial production at new manufacturing plant situated at Sinnar, Nashik, Maharashtra has been successfully commenced, with effect from March 9, 2023,” Hind Rectifiers said.

The company said it has constructed around 12,900 square meters at Sinnar plant. The benefits of these new production lines at Sinnar will however be availed in the following years from 2023-24 onwards. Further, the company said it continues to focus on expanding this product range by way of developing new products in-house.

This commercial production will generate additional revenue for company. The company said it is dedicated to accelerate revenue growth, and improve productivity, in order to achieve significant margin expansion.

Hind Rectifiers is principally engaged in developing, designing, manufacturing, and marketing power semiconductor, power electronic equipments, and railway transportation equipments.

The government has aggressively targeted increased Electric Locomotive production, electrification of new routes, and modernization of Railway facilities, which will resultantly increase the market demand in the coming years.

In the past six months, the stock outperformed the market as shares surged 30 per cent, as compared to 1.3 per cent decline in the S&P BSE Sensex. It had hit a 52-week high of Rs 268 on September 22, 2022, and touched a record high of Rs 286 on January 4, 2022.

However, CRISIL Ratings believes that the financial risk profile and liquidity of Hind Rectifiers may remain under pressure over the medium term owing to low cash profit.

The company reported cash losses for the nine month ended December 2022, due to decline in revenues as well as operating margins. This was due to delays in execution of order, coupled with significant increase in raw material prices primarily electrical components as well as unfavorable product mix.

Although, some recovery is witnessed in Q3 of fiscal 2023, the overall performance for the year is expected to remain below CRISIL Ratings expectations, as well as fiscal 2022.

“A sustained weak operating performance could impact the liquidity in near term. Hence, sustained improvement in business performance and liquidity would be a key monitorable. With orders worth more than Rs 330 crore, to be executed in the next 18 months, it provides near-term revenue visibility and will help sustain growth in revenue. Fresh tenders, expected to float in March 2023, should also ensure a steady flow of orders,” the ratings agency added.