ICICI Direct is bullish on Shree Pushkar Chemicals has recommended buy rating on the stock with a target price of Rs 225 in its research report dated November 21, 2018.
ICICI Direct's research report on Shree Pushkar Chemicals
Shree Pushkar Chemicals (SPCL) reported a steady Q2FY19 performance primarily driven by volume growth in the dyestuff business. On a consolidated basis, net sales in Q2FY19 were at Rs 115.4 crore, up 20% YoY EBITDA in Q2FY19 came in at Rs 19.4 crore (up 11.5% YoY), with corresponding EBITDA margins at 16.8% Margins came in slightly muted against our expectation amid an increase in prices of dye intermediates in the recent past PAT in Q2FY19 was at Rs 12.3 crore, up 18.2% YoY, driven by higher sales & supported by lower effective tax rate, which came in at 27.0%.
Outlook
SPCL has a healthy balance sheet with controlled leverage. FY18 debt: equity was at 0.3x with absolute debt at Rs 64 crore. By virtue of it realising ~2x asset turnover and 15%+ margins; it realises healthy ~20% return ratios thereby warranting inclusion in the midcap portfolio. Going forward, with expanded dyestuff capacity & subsumed Kisan Phosphate, on a consolidated basis, we expect sales, PAT to grow at a CAGR of 12.7%, 16.3%, respectively. We value SPCL at Rs 225 i.e. 14x P/E on FY20E EPS of Rs 16.1. We maintain our BUY rating on the stock. We also derive comfort from the preferential allotment to the promoter group @ Rs 211.6/share amounting to ~Rs 11 crore in May 2018.
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