Anand Rathi Brokerage recommends holding stocks of Everest Industries
Anand Rathi Brokerage is hopeful of Everest Industries’ stock price reaching a high of Rs 332. In this context, after much market analysis, the firm is recommending consumers to hold the shares until in order to earn more profits at a later stage.
Amit Rathi of Anand Rathi Brokerage said, “We believe the greenfield expansion at Dahej and at the UAE would drive volume growth in FY16/17. The new plant in the UAE at 1bn capex will cater to mounting international demand and save in logistics costs, improving the margin. Also, growing demand in southern India and revival of the rupee against the dollar could be the silver lining. We expect the operating margin to come at ~7% despite the greater proportion of revenue from the SB division. Its strong brand has led to the company increasing its revenue and maintaining its market share. “
The brokerage firm believes that in the light of Swachh Bharat Abhiyan and ‘Make in India’ campaign, Everest Industries’ stocks offer good long-term prospects.
A PE of 8x is assigned to FY18e earnings and derive a price target of `332. At the ruling price, the stock quotes at PE of 9.4x FY17e and 7.2x FY18e. Everest Industries’ Q2 revenue climbed 16.3%, supported by growth in its steel-building division.
A financial analyst from Anand Rathi Brokerage delved on the financial detailing. She said, “ The margin narrowed 197bps yoy to 1.5%. On account of the weak H1 FY16 figures and slower-than-expected recovery, we lower our FY16/17 EPS estimates by 35%/29%. 16.3% yoy jump in top line. Q2 FY16 sales grew 16.3% yoy to `2.86bn, powered by the sharp jump in revenue from the steel-building (SB) division (up 69.8% yoy, to `1.2bn). SB volumes grew a significant 70% yoy because of strong capacity utilisation at the new plant in Gujarat. Volumes in the building products (BP) division slid 4.3% yoy due to sluggish rural roofing demand.”
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