AnandRathi Brokerage expects Everest Industries’ stocks to touch Rs 332, recommends holding

AnandRathi Brokerage has pegged Everest Industries’ stocks to reach a value of Rs 332. This expectation has been reached after undertaking extensive market analysis. The firm is recommending consumers to hold the shares to earn more profits at a later stage.
Amit Rathi of AnandRathi Brokerage said that a lot had been going in the company’s favor. The Greenfield expansion at Dahej and at The UAE is expected to drive volume growth in FY16/17. The new plant in the UAE at 1bn capex will cater to mounting international demand and steeply reduce the logistics costs incurred alongside improving the margin. Also, growing demand in southern India and revival of the rupee against the dollar are adding to the strengthening of the scenario. The operating margin is expected to come at ~7%.
The brokerage firm believes that in the light of Swachh Bharat Abhiyan and ‘Make in India’ campaign, Everest Industries’ stocks offer good long-term prospects.
A PE of 8x is assigned to FY18e earnings and derive a price target of `332. At the ruling price, the stock quotes at PE of 9.4x FY17e and 7.2x FY18e. Everest Industries’ Q2 revenue climbed by 16.3%; supported by growth in its steel-building division.
A financial analyst from AnandRathi Brokerage delved on the financial detailing. She said thatthe margin narrowed 197bps yoy to 1.5%. On account of the weak H1 FY16 figures and slower-than-expected recovery, we lower our FY16/17 EPS estimates by 35%/29%. 16.3% yoy jump in top line. Q2 FY16 sales grew 16.3% yoy to `2.86bn, powered by the sharp jump in revenue from the steel-building (SB) division (up 69.8% yoy, to `1.2bn). SB volumes grew a significant 70% yoy because of strong capacity utilization at the new plant in Gujarat. Volumes in the building products (BP) division slid 4.3% yoy due to sluggish rural roofing demand.

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