Accumulate Skipper; target of Rs 62: East India Securities

East India Securitie's report on Skipper

Skipper Ltd’s Q2FY21 revenue grew by 29% YoY to Rs4036mn in Q2FY21, predominantly led by pace of execution. Gross margins contracted by 260bps to 36.1% majorly led by increase in steel and billet prices coupled with inventory damages due to Amphane cyclone during the quarter. EBITDA margin reported expansion of 80bps to 11.8% YoY in Q2FY21 majorly led by positive operating leverage as higher scale of operation led to lower employee costs and other expenses as % of sales. Overall, EBITDA grew by 38.2% YoY to 478mn in Q2FY21. Sharp improvement in operating profit combined with lower interest cost led PAT to report growth of 1836% to Rs125mn in Q2FY21.

Outlook

We value the stock on 12x (earlier 11x) on FY22E EPS basis owing to improved demand outlook, robust execution pace and strong growth in polymer segment, to arrive at a target price of Rs 62 per share (an upside of about 13% from the current levels). Hence, we assign ACCUMULATE rating on the stock.

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