Analysis: Hitech Corporation Limited

Modified on July 1, 2018

This article provides in-depth fundamental analysis of Hitech Corporation Ltd, a plastic container manufacturer.


Hitech Corporation Ltd

Q: Hi Vijay, Can you suggest if I should hold on or exit Hitech Corporation Ltd?

I saw that CFO was higher than PAT, with increasing sales and have decent management as with Asian Paints family. However, somehow, I feel confused what to do. any suggestion?  

What am I missing?



Author’s Response

Thanks for writing to me!


Financial Analysis of Hitech Corporation Ltd:

Hitech Corporation Ltd equity analysis research report

Hitech Corporation Ltd has been growing its sales at a moderate pace of 10-15% year on year since last 8 years (FY2007-14). However, this growth has come at the cost of profitability. Operating profit margins (OPM) have declined from 16% to 11% and net profit margins (NPM) have declined from 6% to 1%. This is not a good sign for any potential investment.

It seems that the company has very low bargaining power with their customers and finds it difficult to pass on the increase in raw material costs to the customers. the company is taking a hit on its profitability margins.

Over the years, the tax payout ratio of the company has been fluctuating from 17% to 40%. An investor should study it in detail to understand whether the company has received any tax concessions etc. from govt.


Operating Efficiency Analysis of Hitech Corporation Ltd:

Operating efficiency parameters of Hitech Corporation Ltd show improvement in efficiency levels over the years. Net fixed assets turnover has improved from 3.0 to 3.4 over recent years. Similarly, inventory turnover ratio of the company has also improved from 10 to 15. These are good signs.

The company has been able to convert its profits in to cash flow from operations. PAT for last 8 years (FY2007-14) is INR 82 cr. whereas the CFO over the similar period is INR 216 cr. Receivables days, though fluctuating, but are in the range of 50-55 days.

The company has utilized the cash generated from operations for reducing its debt levels, capex and paying dividends to shareholders. Debt levels of the company have seen reduction from FY2012 to FY2014.


Margin of Safety in the market price of Hitech Corporation Ltd:

Hitech Corporation Ltd is currently available at a P/E ratio of about 19, which does not offer any margin of safety as described by Benjamin Graham in his book The Intelligent Investor.

Read: 3 Simple Ways to assess the Margin of Safety in a Stock

Also Read: Hidden Risks of Investing in High P/E Stocks



Overall, Hitech Corporation Ltd seems to be a company growing at a moderate pace but sacrificing its profitability in order to chase growth. It seems to have very low bargaining power with its customers. Hitech Corporation Ltd is trying to make for the falling profitability by improving its operating efficiency over the years; however, it is uncertain to what level a company can compensate falling profitability by improving efficiency. At some point of time, the company will have to raise prices. NPM of 1% is very low.

An investor should keep a close watch on the profitability levels of the company. Companies with low profitability run the risk of turning into operating losses at slightest of challenges in the operating environment. Investors should analyse Hitech Corporation Ltd further to understand the reasons for fluctuating tax rates.

Hitech Corporation Ltd also faces customer concentration risk. About 45% of its sales are to one single client, Asian Paints Ltd. A tough business environment to Asian Paints Ltd, might have its impact on Hitech Corporation Ltd as well.

These are my views about Hitech Corporation Ltd. However, you should do your own analysis before taking any investment related decision of holding or exiting the company.

You should do detailed analysis of the company covering financial, business, management and valuation parameters, which you seem to have missed in your appraisal. You may use the following steps to analyse the company: “How to do Detailed Analysis of a Company

Hope it helps!





  • The above discussion is only for educational purpose to help the readers improve their stock analysis skills. It is not a buy/sell/hold recommendation for the discussed stocks.
  • I am registered with SEBI as an Investment Adviser under SEBI (Investment Advisers) Regulations, 2013.
  • Currently, I do not own stocks of the companies mentioned above in my portfolio.

"Peaceful Investing": My Stock Investing Approach

“Peaceful Investing” approach is the result of my more than a decade of experience in equity markets. This approach helped me invest even when I had a full-time corporate job and could not spare a lot of time for stock analysis. During my investing journey, I have faced all the common challenges of the investors, the biggest one being “scarcity of time”. “Peaceful Investing” approach keeps in mind that an investor will have limited amount of time to spare for stock investing. 

The objective of “Peaceful Investing” approach is the selection of such stocks, where once an investor has put in her money, then she may sleep peacefully. Therefore, if later on, the stock prices rise, then the investor is happy as she is now wealthier. On the contrary, if the stock prices fall, even then the investor is happy as she can now buy more quantity of the selected fundamentally good stocks.

Watch Balance Sheet Analysis through a Free Sample Video:

Play Video

Follow My Portfolio with Latest Buy/Sell Transaction Updates

  • Historical annualized return (CAGR) of the portfolio 47.59% against CAGR of Sensex of 10.48%
  • We identified companies, which were later invested by Sanjay Bakshi, Mohnish Pabrai, PE funds, Mutual Funds
  • See details of stocks in our portfolio
  • Get updates of buy/sell transactions in our portfolio by email

Join 30,000 subscribers & get our "Case Studies" e-book for FREE:

  • Get a Free e-book on "Peaceful Investing" case studies and learn by reading live company analysis
  • Get immediate notification on our future articles & company analysis delivered to your email
  • You will receive the e-book immediately by an email from
  • If you do not find our email in the inbox within next 5 seconds, then please search in spam/social/ promotions folders

Please share your comments here:

Analysis: Globus Spirits Ltd

The current section of “Analysis” series covers Globus Spirits Ltd, a manufacturer of country liquor (IMIL) and bottler for Indian made foreign liquor (IMFL) having

Read More »

Analysis: Mahanagar Gas Ltd

The current section of “Analysis” series covers Mahanagar Gas Ltd, the distributor of natural gas in the Mumbai and Thane region supplying piped natural gas

Read More »

Analysis: Albert David Ltd

The current article of “Analysis” series covers Albert David Ltd, a Kolkata based Indian pharmaceutical manufacturer producing acute therapy drugs and human placenta extract based

Read More »

Analysis: Stovec Industries Ltd

The current section of “Analysis” series covers Stovec Industries Ltd, a leading producer of printing machines & consumables for textile printing, graphics printing. The company

Read More »