PINC assigns buy to Himadri Chemicals; target Rs 509
PINC Research has recommended ‘buy’ on Himadri Chemicals and Industries for a 12 months target price of Rs 509.
By ET Online |
MUMBAI: PINC Research has recommended ���buy��� on Himadri Chemicals and Industries for a 12 months target price of Rs 509. The company���s results were in line with the brokerage expectations as net sales grew by 52.3 per cent year on year to Rs 110 crore and 36.6 per cent increase in net profit to Rs 22.7 crore.
The higher net sales growth was due to the surge in realization of Coal Tar Pitch, a key product. While contribution per tonne has improved, operating profit margin ebbed by 390 basis points to 31 per cent.
Realisations of CTP increased to Rs 28k/mt in Jan-Mar 2007-08 compared to Rs 26k/mt for 2007-08. This jump is due to the rise in coal tar prices (its key raw material) to Rs 15k/mt as compared to annual average of Rs
13k/mt. As Himadri operates on ���fixed contribution margin,��� it could easily transfer the cost burden to its customers, says PINC.
A delay of 6-7 months in commissioning the distillation plant in China is expected due to delays in financial closure. Therefore, 2009-10 distillation capacity in China would be lower at 250k mt (100k mt greenfield and 150k mt brownfield) vis-a-vis 400k mt as initially expected.
Himadri has started producing Advance Carbon (Mesophase Pitch) during Jan-Mar 2007-08 and sold 32 metric tonne at Rs 300k/mt. This capacity is expected to increase to 650 metric tonne by Jul-Sep 2008-09. Its carbon black facility is expected to be commissioned by Jan-Mar 2008-09.
At the market price of Rs385, the stock trades at a P/E of 5.8x and EV/EBITDA of 5.3x FY10 estimates.
The higher net sales growth was due to the surge in realization of Coal Tar Pitch, a key product. While contribution per tonne has improved, operating profit margin ebbed by 390 basis points to 31 per cent.
Realisations of CTP increased to Rs 28k/mt in Jan-Mar 2007-08 compared to Rs 26k/mt for 2007-08. This jump is due to the rise in coal tar prices (its key raw material) to Rs 15k/mt as compared to annual average of Rs
13k/mt. As Himadri operates on ���fixed contribution margin,��� it could easily transfer the cost burden to its customers, says PINC.
A delay of 6-7 months in commissioning the distillation plant in China is expected due to delays in financial closure. Therefore, 2009-10 distillation capacity in China would be lower at 250k mt (100k mt greenfield and 150k mt brownfield) vis-a-vis 400k mt as initially expected.
Himadri has started producing Advance Carbon (Mesophase Pitch) during Jan-Mar 2007-08 and sold 32 metric tonne at Rs 300k/mt. This capacity is expected to increase to 650 metric tonne by Jul-Sep 2008-09. Its carbon black facility is expected to be commissioned by Jan-Mar 2008-09.
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At the market price of Rs385, the stock trades at a P/E of 5.8x and EV/EBITDA of 5.3x FY10 estimates.
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