Styrolution ABS - 1QCY2013 Result Update - Angel Broking

Styrolution ABS (Styrolution) reported a poor set of numbers for 1QCY2013. Top-line growth for the quarter was flat at 2.6% yoy to Rs. 242cr, 6.9% lower than our estimate of Rs. 260cr. The poor performance is attributable to the current slowdown in the economy which has subdued the growth of user industries. The EBITDA was higher by 3.0% yoy to Rs. 23cr, and 6.13% lower than our expectation, owing to poor top-line growth. The EBITDA margin for the quarter remained constant yoy at 9.7%, better than our estimate of 9.6%. The company reported a net profit of Rs. 15cr, 15% lower than our estimates of Rs. 18cr.

Persisting short supply coupled with capacity expansion to boost growth Styrolution had expanded its capacity of ABS and SAN. This provides the company an opportunity to reap benefits owing to domestic ABS demand supply gap (met by imports) which has persisted for long and continues to exist. In addition to capacity expansion the company has come up with many tailor made products taking advantage of ABS' flexibility of composition and structure, which allows its use in diverse applications.

Outlook and valuation: We expect Styrolution's revenue to post a CAGR of 11.2% over CY2012-14E to Rs. 1,223cr in CY2014E on the back of consistent developments by the company. The EBITDA and net profit are expected to post a CAGR of 11.1% and 11.8% respectively over CY2012-14E. With recent correction in the stock price, Styrolution is available at an attractive valuation of 11.1x PE and EV/Sales of 0.7x for CY2014E. As we rollover to CY2014E, we continue to maintain our Buy recommendation on the stock with a revised target price of Rs. 617, based on a target PE of 14x, providing 26% upside from current levels.

Source : Equity Bulls

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