Emmbi Industries - Result Update - ICICI Securities

Despite a significant fall in polypropylene prices and thereby realisations, the company managed to post almost flat topline during the quarter, largely on account of better volume growth. Emmbi reported revenue of Rs. 74.7 crore (-1% YoY). Gross margins for the quarter improved 155 bps YoY to 36% due to a change in the product mix, which negated the impact of negative operating leverage to certain extent. EBITDA fell 19% YoY to Rs. 8.57 crore, impacted by higher employee (+25% YoY) and other cost (+16% YoY). OPM remained at 11.5% (-250 bps YoY). Poor operational performance led to a subdued bottomline at Rs. 3.75 crore (-22% YoY).

Valuation & Outlook

We believe negatives are already discounted in the price. Going ahead, with increase in trade likely to improve FIBC sales along with better monsoon in domestic market should aid pond liner sales. This should provide respite to vulnerability in gross margins and, thereby, operating margins. We expect with an increasing share of B2C towards high thirties, there should be an inch up in operating margins along with improvement in the cash conversion cycle. This should likely improve FCF for the company and can also expand return ratios for the company. In turn, this is likely to aid valuations for the overall group. We value the company at 7x PER FY22E and arrive a target price of Rs. 85. We have a BUY rating on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_EmmbiInds_Q4FY20.pdf

Shares of Emmbi Industries Ltd was last trading in BSE at Rs.74 as compared to the previous close of Rs. 70.5. The total number of shares traded during the day was 6189 in over 46 trades.

The stock hit an intraday high of Rs. 74 and intraday low of 74. The net turnover during the day was Rs. 457986.

Source : Equity Bulls

Keywords