HEG Ltd - Margin expansion - a positive surprise - Emkay

Reco: HOLD
CMP: Rs 227
Target Price: Rs 245

- Adjusting for forex loss of Rs 484 mn (mostly realized) PAT stood at Rs 717 mn, up 262% YoY and 35% QoQ despite QoQ higher int. cost of Rs 160 mn; effective tax rate stood at 2.9%

- EBITDA margin of 27% (up 1103 bps YoY and 904 bps QoQ) surprised positively as net RM costs to sales fell to 41%. EBIT margins for both graphite and power rose sharply.

- Topline despite rising by 38% YoY fell by 6% QoQ to Rs 384 mn; believe this is primarily due to lower utilizations (75%), even as realizations remained better due to INR depreciation.

- Cutting FY13 EPS on lower utilization, revising FY14 estimate upward on better operational efficiency. Value at 5xFY14 EV/EBITDA to arrive at SOTP target price of Rs 245; Hold.

Source : Equity Bulls

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