Prabhudas Lilladher is bullish on I.G. Petrochemicals has recommended buy rating on the stock with a target price of Rs 477 in its research report dated May 16, 2019.
Prabhudas Lilladher's research report on I.G. Petrochemicals
IGPL stock has corrected sharply led by weakening PAN-OX spreads due to high raw material prices. High OX prices were due to soaring PX prices, a competing product given strong polyester demand and muted capacity addition. However, massive supplies of (over 12MTPA) PX in China by end of CY19 is likely to soothe the PX and OX prices, in our view. This will benefit IGPL where capacity addition is likely to come on stream. We cut our FY20/21E estimates by 14-15% as we trim our EBIDTA margins to 15% vs 17% earlier due to weak consumption demand outlook in the near term.
Outlook
IGPL with 53,000MT capacities coming on stream by end of CY19 is set to be the third largest PAN player globally. Maintain BUY with a PT of Rs477 (Rs530 earlier) as we value IGPL at 6x EV/E or 10x PER FY21E. Maintain Buy
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