Edelweiss Securities downgrades Bombay Rayon
Edelweiss Securities has downgraded Bombay Rayon’s stock to ‘accumulate’ from ‘buy’ . Garment sales are estimated to contribute 66% to Bombay Rayon Fashions’ consolidated revenues in FY09.
RESEARCH: EDELWEISS SECURITIES
RATING: ACCUMULATE
CMP: Rs 110
Edelweiss Securities has downgraded Bombay Rayon���s stock to ���accumulate��� from ���buy��� . Garment sales are estimated to contribute 66% to Bombay Rayon Fashions��� (BRFL) consolidated revenues in FY09. The company exports 100% of its garments to the US and Europe.
With both these key geographies witnessing economic turmoil, same store sales of BRFL���s clients have dropped almost 3% to 15%. BRFL reported robust numbers in Q2 FY09 with net sales up 28% y-o-y at Rs 290 crore and EBITDA up 39% yo-y at Rs 68.7 crore.
Even though the management seems confident of delivering 50% topline growth in FY10, Edelweiss has revised down its estimates of revenues from garment sales by 24% in FY10 to Rs 1,097 crore. At CMP, the stock is trading at a P/E of 5.4x FY09E EPS of Rs 19.9 and 4.9x FY10E EPS of Rs 21.9.
The stock has corrected 60% since July 1, ���08, factoring in most of the risks of a slowdown in its garment business. But Edelweiss believes the overhang of negative news flow from its key markets and customers , as well as downside risks to topline due to cancellation of orders or defaults on payments, will hinder any major outperformance of the stock.
RATING: ACCUMULATE
CMP: Rs 110
Edelweiss Securities has downgraded Bombay Rayon���s stock to ���accumulate��� from ���buy��� . Garment sales are estimated to contribute 66% to Bombay Rayon Fashions��� (BRFL) consolidated revenues in FY09. The company exports 100% of its garments to the US and Europe.
With both these key geographies witnessing economic turmoil, same store sales of BRFL���s clients have dropped almost 3% to 15%. BRFL reported robust numbers in Q2 FY09 with net sales up 28% y-o-y at Rs 290 crore and EBITDA up 39% yo-y at Rs 68.7 crore.
Even though the management seems confident of delivering 50% topline growth in FY10, Edelweiss has revised down its estimates of revenues from garment sales by 24% in FY10 to Rs 1,097 crore. At CMP, the stock is trading at a P/E of 5.4x FY09E EPS of Rs 19.9 and 4.9x FY10E EPS of Rs 21.9.
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The stock has corrected 60% since July 1, ���08, factoring in most of the risks of a slowdown in its garment business. But Edelweiss believes the overhang of negative news flow from its key markets and customers , as well as downside risks to topline due to cancellation of orders or defaults on payments, will hinder any major outperformance of the stock.
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