East India Securities is bullish on Bodal Chemicals has recommended buy rating on the stock with a target price of Rs 70 in its research report dated July 08, 2020.
East India Securities' research report on Bodal Chemicals
Q4FY20 revenue of Bodal Chemicals grew by 7.0% YoY to Rs3685mn in Q4FY20 majorly owing to a robust growth of 13% YoY in Dyestuff business. Gross margins expanded by 358bps to 37.6% in Q4FY20 because of decline in raw material prices of Naphthalene and Aniline. Despite strong improvement in gross margin, EBITDA margins contracted by 189bps to 10.8% in Q4FY20 vs 12.7% in Q4FY19 and Overall EBITDA declined by 8.8% to Rs 399mn in Q4FY20 owing to sharp increase in employee expenses of 132% YoY. Further, increase in depreciation and interest cost led consolidated PAT witnessing a decline of 22% YoY.
Outlook
Currently, the stock is trading at FY22E P/E of 9.1x and EV/EBITDA of 5.4x. We value the stock on forward P/E of 9.5x and arrive at a target price of Rs 70 per share which indicates an upside of 4.9% from the current levels. Hence, we assign HOLD rating on the stock.
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