Everest Kanto Cylinder - Disappointment Continues - PINC Result Review

DISAPPOINTMENT CONTINUES

Everest Kanto Cylinder Ltd's (EKC) Q1FY11 results were again disappointing with net sales declining by 9.8% YoY to Rs1.4bn. Higher raw material cost and other expenses led OPM to contract 5.5% against 21.7% in Q1FY10. Consequently, the company registered an adjusted net loss of Rs40mn against adj net profit of Rs102mn YoY.

VALUATIONS AND RECOMMENDATION

We maintain our earnings estimates for FY11 and FY12, however, the next couple of quarters should define the future in terms of margins and growth and hence we are not rolling forward our valuations to FY12 earnings. At the CMP of Rs128, EKC trades at a P/E of 23.9x and EV/ EBITDA of 12.5x for FY11E EPS of Rs5.3. We maintain our ‘HOLD' recommendation with a target price of Rs113 (~21x FY11E EPS).

Source : Equity Bulls

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