Everest Industries - Bolstering Growth Prospects - Sunidhi

Q2FY13 & FY12 Results: During Q2FY13, sales rose 19.7% to Rs.221.0 crore and net profit by 108.3% to Rs.12.5 crore. (YoY). OPM and NPM stood at 11.4% and 5.7% compared to 8.1% and 3.3% respectively in Q2FY12. During FY12, sales advanced by 21.9% to Rs.881.5 crore and net profit rose by 17.2% to Rs.41.5 crore. EPS stood at Rs.27.5. OP and NP margin stood at 9.9% and 4.7% against 10.7% and 4.9% respectively in the corresponding period last year. The results for FY12, excludes capital gain of Rs.11.3 crore being the proceeds of sale of land. The DER stood at 0.3:1 (Previous Year 0.5:1) whereas the value of the gross block is Rs.379 crore.

At the CMP of Rs.233, the share is trading at a P/E of 4.7x on FY13E and 3.9x on FY14E. We recommend BUY with a target price of Rs.300 at which the share will trade at a P/E of 5.0 on FY14E.

A number of players are increasing capacity in the roofing segment. In case rural demand falls, this could lead to over capacity, pressure on realizations and profitability.

Seasonality - Since EIL's building product business is largely driven by sales in rural India it is seasonal in nature (impacted by Kharif and Rabi crop cycles) and hence the March and June quarters are generally better than the rest of the year. However, entry into the steel building segment should help to smoothen sales to an extent.

Source : Equity Bulls

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