Reliance Money sees over 50% rise in Gujarat NRE Coke

MUMBAI: In its results update note, Reliance Money has reiterated its ���Buy��� call on Gujarat NRE Coke with a price target of Rs 83.

Gujarat NRE Coke posted net sales of Rs 3.8 bn (37% YoY cut), EBIDTA of Rs 0.64 billion (down by 88% (YoY)) and PAT of Rs 0.2 billion (decline by 96% (YoY)). The EBIDTA margins were crushed by 1295 bps on annual comparison.

���Effect of reduced raw material prices is expected to be reflected from Q310 onwards. We expect the EBIDTA margins to strengthen going forward. A sharp increase in EBIDTA margins due to correction in raw material prices and strengthening coke prices in domestic markets due reduction in cheap imports is expected in coming quarters.

���At CMP the scrip quotes at an EV/EBIDTA of 3.5x and P/E of 4.8x for FY11E earnings. We expect the revenues to grow at CAGR of 41% over FY09 & FY11E while the bottomline to expand by whopping 135% over the same period. We reiterate our earlier buy with a price target of Rs 83 at which the scrip will quote at an EV/EBIDTA of 4x and P/E of 6.5x for FY11E earnings,��� the report said.