Result Update: Shankara Building Products Ltd - ACCUMULATE - TP Rs.2017 - Kotak

Shankara Building Products Ltd results were marginally lower than our estimates due to higher interest expense. Company added 21 stores in FY18 and increased the proportion of retail segment sales to 48% from 42% last year with new store addition and store upgradation.

Key highlights

Revenue growth of 26.7% YoY is led by incremental stores as well as addition of new products. Net profits growth of 13.5% YoY for Q4FY18 is slightly lower than our estimates and was impacted by increase in borrowings on account of acquisitions as well as higher tax rate.

Company has also taken board approval for raising funds upto Rs 3 bn mainly for further acquisitions, capex, front end and back end enhancement as well as for working capital requirements which can be an overhang on the stock in near term.

Valuation and outlook

At current price of Rs 1868, stock is trading at 35.2x P/E and 18.8x EV/EBITDA on FY20 estimates. We tweak our estimates and arrive at a revised price target of Rs 2017 based on 23x EV/EBITDA for retail business and 8x EV/EBITDA for channel and enterprise business. (Rs 2009 earlier). Owing to limited upside from the current levels, we downgrade the stock to ACCUMULATE from BUY earlier.

Shares of Shankara Building Products Ltd was last trading in BSE at Rs.1895.25 as compared to the previous close of Rs. 1902.75. The total number of shares traded during the day was 7399 in over 469 trades.

The stock hit an intraday high of Rs. 1932.2 and intraday low of 1889. The net turnover during the day was Rs. 14086171.

Source : Equity Bulls

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