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Research
Maxwell Industries - Results below expectations, faster roll-out of premium products required - Karvy
Posted On : 2013-02-14 01:27:26( TIMEZONE : IST )
Maxwell Industries sales & EBITDA grew by 8% & 19% YoY while Adj. PAT was Rs5.2mn compared to loss of Rs13.1mn inQ2FY12.
Revenue Growth: The Company's top-line grew 7.9% YoY to Rs613mn (our expectations Rs735mn) during Q3FY13, while sequentially revenue slipped 18.9%. The Company's decision to focus on innerwear and closing spinning business is showing better results. It is focused on new product lines under Eminence & VIP brands to establish itself as a premium innerwear manufacturer. This is expected to further help improving operating margins on higher realizations.
The Company's EBITDA grew 18.5% YoY to Rs50.8mn (our expectations Rs72mn) during Q3FY13 on account of lower operational costs. EBITDA margin for the quarter stood at 8.3% improving by 74 bps YoY and 33 bps QoQ. Advertisement expenses were up by 37% YoY to Rs24.1mn for Q3FY13. The Company aims to incur Rs100mn in advertisement for FY13, out of which Rs89.2mn were incurred during 9MFY13. Therefore better operating margins are expected on lower advt. expenses and better realizations. Net income for Q3FY13 was reported at Rs5.2mn compared to loss of Rs13.1 in the corresponding quarter.
We revised down our expected Sales by 3.2% and 2.3% for FY13E and FY14E respectively & EBITDA by 15.6% for FY13E and FY14E. Expected PAT has been revised down by 32.4% and 20.8% for FY13E and FY14E respectively. We believe faster roll out of premium products can expand EBITDA margins and net income, which could be an upside risk to our estimates.
Outlook & Valuations
We expect revenues to grow at a CAGR of 19% over FY12-FY14E while net income is expected to reach Rs98mn from losses in FY12. At CMP of Rs18, the stock trades at 6.8x & 11.8x FY14E EV/EBITDA and earnings. We downgrade our target price to Rs24 (Rs26) per share based on 8x FY14E EV/EBITDA and upgrade our recommendation to "BUY" on attractive valuations with upside potential of 32%.
