Emkay Global Financial is bullish on Apcotex Industries has recommended buy rating on the stock with a target price of Rs 120 in its research report dated May 24, 2020.
Emkay Global Financial's report on Apcotex Industries
Apcotex’s Q4FY20 revenue came slightly ahead of our estimates (down 23.8% yoy), mainly due to lower realizations, with volumes holding ground (flat yoy/up qoq). Export markets, aided volume growth, due to diminished market price differentials. EBITDA margins came above our estimates, owing to a higher revenue base and lower raw material costs. Furthermore, gross margins expanded 250bps yoy. Feb-Mar’20 saw good demand for key products. However, due to the lockdown and supply chain issues, ~ Rs170mn of topline was lost, along with stretched working capital. Management sees next 1-2 quarters under stress and is laying out steps to better position Apcotex to benefit from ensuing demand post-recovery.
Outlook
Hands-on approach to maximize the capacity utilization would garner benefits in the medium term. We introduce FY23 estimates, forecasting topline growth at 23% CAGR (FY21-23E). We roll forward our valuations to arrive at a TP of Rs120 (earlier Rs114), and maintain our Buy rating, with UW in EAP.
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