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Venkys Target: Rs 561.00
07 Dec 16

Result Update

Dear Sir/Madam, Venky’s (India) Ltd Q2FY17 Result Update CMP: Rs 445 Target: Rs 561 Previous Rating: Accumulate Current Rating: Accumulate Good growth at top-line level continued: We have been expecting a subdued performance during 2QFY17 on account of weak chicken prices throughout the quarter, especially in the month of Aug and Sept as compared to 1QFY17. However the performance was even below the subdued expectations, especially at profitability levels. The company witnessed 32% higher total revenues on yoy basis, better than our estimates. This was led by Oilseed business which contributed around 46% of the sales, grew by strong 40% during the quarter. Animal Health Products which also witnessed a good growth of 38% and contributed 9% of sales. Poultry & Poultry Products business which contributed 45% of the business, also posted a growth of 25%. This was purely account of volume growth as company cannot keep inventory of broilers, hence kept selling even at loss. A subdued margins on lower realizations: EBITDA margin was 3.2%, way below as compared to 12.9% in Q1FY17 and 5.2% in Q2FY16. The yoy margin contraction was on lower realizations. RM costs (as % of sales) were way up and that led to a deep margin contraction. Poultry business made loss at operating level, with margin of -0.7% vs 3.5% in Q2FY16. Oilseed business margin was okay at 4.5% vs 4.1% seen during same period last year. Animal Health products margins were slightly disappointing at 15.9% vs 18.9% in Q2FY16. Margin contraction in Poultry business on YoY basis led to a de-growth of 20% yoy at EBITDA level. A strong performance at net level: Lower depreciation and slightly higher incomes helped the profitability a bit. Effective tax rate was quite high during the quarter. And Finally, the company reported a huge de-growth of 95% at net level. Outlook and Valuation: After two quarters of strong performance, this was a disappointing quarter. This was on lower chicken prices during most part of the quarter. The company’s performance depends a lot on volatile chicken prices. During Q3FY17, post demonetization chicken prices cracked and went down way below cost of production. Considering Q2FY17 disappointing performance and expected a bad Q3FY17, we have revised FY17 and FY18 earnings estimates downwards. Our downwardly revised TP is Rs 561 (10x FY2018E EPS). The stock of the company has corrected recently on account of declining chicken prices. Now it offers ~26% upside from current levels. Hence, we maintain our Accumulate on the stock of the company.

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East India Securities Ltd

Astral Poly Tec Target: Rs 500.00
18 Nov 16

Result Update

Dear Sir/Madam, Astral Poly Technik Q2FY17 Result Update CMP: Rs 419 Target: Rs 500 Previous Rating: Accumulate Current Rating: Accumulate Moderate growth at sales : Astral Ploy's standalone top-line grew by 9.6% to Rs 3343.2 Mn. The sales growth came on account of 14.9% growth in sales volume to 20,522 MT. Sales performance was below our estimates. Astral has now introduced its own pipe brands after break-up with Lubrizol which led to lower realizations in CPVC business. Margin contracted on yoy basis: On YoY basis margin was down by around 90 bps to 12.7% due to hit in the realization as company took some price cut after introducing its own pipe brands which resulted into around Rs 90 Mn loss. EBITDA grew by 2.1% to Rs. 425.6 Mn as against Rs. 416.8 Mn in the same quarter previous year. However, margin was stable on sequential basis. PAT grew at good pace: Lower finance costs along with higher other income aided profits. Lower finance costs were mainly due to currency gains as against currency loss during same quarter last year. Effective tax rate was lower at 30.6% vs 36.1% seen during Q2FY16. Finally, the company reported a 44% growth at net level to 213.4 Mn which was in-line with our estimates. During the quarter, pipe business grew by 9.5% whereas adhesives business witnessed a growth of 14.5%. Overall, On Consolidated basis, revenues was up by 10.2% but PAT was up by strong 43% due to higher margins in adhesive business on yoy basis. Also exchange fluctuation was favourable during Q2FY17 as against a loss due to the same in Q2FY16 and this led to strong PAT performance despite moderate growth and flattish margins. Outlook and Valuation: The performance of adhesive business was quite encouraging whereas pipe business was okay considering Astral is now working with its own brands. New strategic tie-up with Japanese player Sekisui for CPVC resin procurement and backward integration for converting resin to compound are expected to help margins Q3FY17 onwards. With polymer prices stabilizing, Astral has started taking small price hikes in PVC businesses. Besides fundamentally strong pipe business, its newly acquired subsidiaries in adhesive & sealant businesses promise a great future on account of several synergies with Astral and almost doubling the capacity of adhesives during FY17. Incorporating 1HFY17 performance and possible negative impacts of demonetization, we have cut slightly down our projections and our SOTP based target price is now Rs 500 per share. After some recent corrections, the stock now offers ~20% upside from current level. Thus, we maintain our Accumulate rating.

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East India Securities Ltd

Talbros Auto Target: Rs 171.00
17 Nov 16

Result Update

Dear Sir/Madam, Talbros Automotive Components Q2FY17 Result Update CMP: Rs 128.3 Target: Rs 171 Previous Rating: Buy Current Rating: Buy Key highlights of the results: Okay performance at top-line level: Consolidated net sales for the quarter grew by 8.9% to Rs 1,061.6 Mn, whereas the Standalone revenues grew by 4.7% to Rs 809.5 Mn. Gasket sales grew by 13.1% on YoY basis and 3.0% on QoQ basis. Forging business recorded its first positive sales growth since the last 4 quarters with a growth of 13.3% on YoY basis while on sequential basis it remained flat. Nippon Leakless Talbros (NLT) sales grew by 20% on YoY as while on QoQ basis it grew by 9.1%. Magnetti Marelli Talbros Chassis System (MMT) sales grew at a substantial pace of 42.9% on YoY basis and 11.1% on QoQ basis. Talbros Marugo Rubber (TMR) sales grew at a staggering 51.9% on YoY basis and 7.9% on QoQ basis. Revenue for H1FY17 grew by 10.3% to Rs 2,132.9 Mn. EBITDA margin remains flat: Consolidated EBITDA margins contracted by a marginal 31 bps on YoY basis on account of increase in raw material and employee costs, however it was offset by a decline in other operating and manufacturing expenses. Employee cost as a % of sales increased from 13.0% to 13.4%, a 34 bps increase. Other manufacturing expenses as a % of sales decreased from 21.3% to 19.9%, a 136 bps improvement. On QoQ basis, EBITDA margins declined by 10 bps. RM as a % of sales increased from 54.9% to 56.2%, a 134 bps increase. EBITDA for H1FY17 grew by 12.1% to Rs 224.5 Mn while EBITDA margins improved by 17 bps to 10.5%. Higher other income and lower interest expense led to a good PAT growth: Consolidated PAT grew by 67.9% to Rs 41.2 Mn in Q2FY17 as compared to Rs 24.5 Mn in Q2FY16. Growth in PAT was mainly on account of increase in other income and lower interest expense. Other income jumped from Rs 1.8 Mn to Rs 22.0 Mn, an exponential increase. Interest cost declined by 10.8% to Rs 39.7 Mn in Q2FY17 as compared to Rs 44.6 Mn in Q2FY16. Tax rate declined from 36.1% in Q2FY16 to 25.4% inQ2FY17. PAT for H1FY17 grew by 53.2% to Rs 71.8 Mn. Outlook & Valuation: The company has got a decent first half in the bag. It is currently in-line to meet management expectation of 10% to 12% revenue growth. The company’s pain point seems to have eased out with forging business posting a positive growth for the first time after four quarters. The recent demonetisation effort by the government is expected to hit auto sales, however this will be a short term pain. Demand revival will happen once cash circulation gets normalised. The positive impact of new orders from various OEMs, boost in demand due to 7th pay commission and GST implementation, are expected to drive strong performance in FY17 and FY18, with improving EBITDA margin. Based on these factors, we maintain our DCF based TP of Rs 171 per share (7.2x FY18E EPS). The stock offers a 33.3% upside from current level. Thus, we maintain our Buy rating.

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East India Securities Ltd

Grauer & Weil Target: Rs 42.20
11 Nov 16

Dear Sir/Madam, Grauer and Weil (India) Ltd Q2FY17 Result Update CMP: Rs 37.5 Target: Rs 42.2 Previous Rating: Accumulate Current Rating: Accumulate Tepid top-line growth: Total revenues for the quarter grew by a small 3.3% to Rs 1,036.6 Mn (10.3% QoQ) as against our estimate of 12%. This was on account of lower growth in its main business, i.e, chemicals (73% of revenues) which grew by a tepid 2.2% on YoY basis. Its second major business, i.e. paints (14% of revenues) grew by a moderate 7.1%, while the Mall business outperformed the lot. Total revenue for H1FY17 grew by 4.7% to Rs 1,976.0 Mn. Improving EBITDA margins fuelled PAT growth: EBITDA for the quarter grew by 13.9% YoY (25.5% QoQ) while EBITDA margins expanded by 226 bps on YoY basis (290 bps on QoQ basis) led by decline in Raw material and other expenses however, employee costs saw an increment. Raw material cost as a % of sales was down by a staggering 239 bps YoY to 45.7%. Other expenses as a % of sales was down by 65 bps to 17.7%. However, employee costs as a % of sales increased by 78 bps to 12.5%. Total EBITDA for H1FY17 grew by 17.4% to Rs 458.0 Mn while EBITDA margins improved by 248 bps to 22.8%. PAT jumped by 10.9% YoY (23% QoQ) to Rs 155.2 Mn. PAT growth was fuelled by increase in EBITDA margins and lower interest costs. Interest cost declined by 46.6% YoY for the quarter and 10.8% sequentially while other income came in at Rs 4.6 mn in Q2FY17 as against Rs 12.6 mn in Q2FY16. Tax rate during the quarter was higher at 26.7% as compared to 20.9% in Q2FY16 (21.3% in Q1FY17). Total PAT for H1FY17 grew by 32.9% to Rs 281.4 Mn. Chemical growth outperforms, Engineering and mall business laggards: Chemical revenue for the quarter grew by 2.2% (11.8% QoQ) to Rs 772.8 mn. Engineering segment grew by a meager 0.5% during the quarter to Rs 54.9 mn (41.5% QoQ). Mall business grew by 23.0% YoY (41.0% QoQ) to Rs 65.3 mn. Paint business grew by 7.1% YoY (down 7.3% QoQ) to Rs 144.0 mn, whereas the oil business de-grew by 8.4% YoY (down 10.7% QoQ) to Rs 24.1 mn. Positive EBIT for the engineering business, a rare event: Chemical EBIT margin declined to 28.2% during Q2FY17 from 29.8% in Q2FY16 (30.0% in Q1FY17). Engineering EBIT turned positive during the quarter at 20.0% as compared to -30.2% in Q2FY16 (-18.8% in Q1FY17). Mall EBIT margin came in at 61.6% during Q2FY17 from 58.9% in Q2FY16 (29.2% in Q1FY17). Paint EBIT stood at 10.6% during the quarter as compared to 1.6% in Q2FY16 (+10.5% in Q1FY17). Oils EBIT increased to 23.2% during the quarter as against 16.0% during Q2FY16 (19.6% in Q1FY17). Outlook & Valuation: Overall it was a strong quarter for the company in terms of EBITDA margins and PAT. However, on the revenue front, the company struggled to find growth in its main business, i.e., Chemicals. On the other hand, the malls business saw a good growth in terms of revenues as well as margins. Margin expansion for the overall business was aided by the engineering business, which turned positive. Considering a scenario of slow growth in revenues and improving margins quarter over quarter, we have updated our FY17 and FY18 financial projections and upgraded our TP. At CMP of Rs 37.5, the stock is trading at 11.7x FY18E EPS. Our revised TP of Rs 42.2 (13.1x FY2018E EPS) offers ~12.4% upside from current level. Thus, we maintain our ACCUMULATE rating on the stock.

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East India Securities Ltd

Nitin Spinners Target: Rs 155.00
09 Nov 16

Result Update

Dear Sir/Madam, Nitin Spinners Limited Q2FY17 Result Update CMP: Rs 72.2 Target: Rs 155 Previous Rating: Buy Current Rating: Buy Key highlights of the results: Top-line growth in line with increase in yarn realisations: The company’s utilisation level continued to remain at ~100% while realisation growth led to an increase in top-line by 8.8% to Rs 2,069 mn, better than our estimates. On sequential basis also utilisation levels sustained at full capacity while increase in yarn realisations resulted into to a revenue growth of 6.8%. For H1FY17, top-line grew by 3.6% to Rs 4,005 mn. EBITDA margin decline was on expected line: EBITDA for the quarter de-grew by 8.2% on YoY basis to Rs 320 mn while margins contracted by 286 bps to 15.5%. Major contraction in EBITDA was on account of increasing Raw Material as a % of sales, from 58.9% to 62.1%, a 319 bps increase. Other manufacturing expenses and power costs as a % of sales decreased marginally from 17.0% to 16.4%, a 60 bps decrease. Employee cost as a % of sales increased marginally from 5.8% to 6.1%, a 27 bps increase. Sequentially, due to continued raw material costs pressure, the EBITDA margins have declined by 50 bps. For H1FY17, EBITDA de-grew by 13.4% to Rs 629 mn while margins have contracted by 309 bps. PAT surprises on account of lower interest cost and lower tax outgo: PAT came in at Rs 140 mn as against our estimate of Rs 121 mn, registering a handsome growth of 35.9% on YoY, mainly on account of lower interest cost and lower tax outgo. Sequentially, PAT grew by 14.9% while on half yearly basis, PAT grew by 18.8%. Outlook & Valuation: The company has commenced trial run on 72,960 spindles during Q3FY17 as against our estimate of Q4FY17. Hence we can expect a better top-line growth from Q3FY17 onwards. However, trail run revenues will not add much to the operating profits as trail phase margins are negligible. Overall the industry situation was tough during Q2 on account of sharp increase in cotton prices as compared to yarn prices. However, the recently trend seems to be reversing. Cotton prices have declined at a faster pace as compared to yarn prices. Based on these trends, we expect the margins to improve in the coming quarters. At CMP of Rs 72, the stock is trading at 4.9x FY18E EPS. We have maintained our target price of Rs 155 per share, 10.5x FY18E EPS. The stock of the company offers 115% gain from current levels. Thus, we maintain our Buy rating.

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East India Securities Ltd

K P R Mill Target: Rs 1303.00
27 Oct 16

Result Update

Dear Sir/Madam, KPR Mill Ltd Q2FY17 Result Update CMP: Rs 1150 Target: Rs 1303 Previous Rating: Accumulate Current Rating: Accumulate A strong growth at top-line on account of sale of sugar inventory : KPR Mill total consolidated revenue for the quarter grew by ~24% to Rs 7554 mn, slightly higher than our estimates. This came on the back of strong growth from sugar business. Textile revenue for the quarter grew by 9.4% yoy (down 2.9% qoq) to Rs 5762.8 mn. As expected, Sugar business fared very strong and revenue from this segment grew by huge 335.8% yoy (up 805.1% qoq), to Rs 1315.1 mn. The company was able to sell sugar inventory at higher prices around Rs 33.5 per kg during the quarter. Margin expansion on back of prudent procurement of cotton and strong sugar business: Raw material cost and other costs as a % of sales was down by 80 bps to 60.5% and 60 bps yoy to 9.1% respectively. Higher employee costs as % of sales offset some positive impact of lower RM costs on YoY basis . And finally margin was up on yoy basis at 20.5%, up 60 bps. Textile EBIT margin expanded to 17.5% from 15.4% in Q2FY16. Sugar EBIT margin was 11.1% vs 0.6% in Q2FY16. Overall EBIT margin was up by 190 bps on yoy basis. Interest cost grew by 14% yoy. Other income came at Rs 75 mn vs Rs 48 in Q2FY16. Lower effective tax rate at 24.9% vs 28.3% in Q2FY16. Overall PAT was up by ~56%. Textile business reported good growth: Textile revenue for the quarter grew by 9.4% yoy (down 2.9% qoq) to Rs 5762.8 mn. Good growth in the garment business continue to support the overall growth. Sale of sugar inventory led to good performance : The company was able to sell around 37,000 tonnes of sugar inventory which led to strong growth in the sugar business. There is still around 8,000 tonnes of sugar inventory left. Outlook & Valuation: KPR came out with strong set of performance despite higher cotton prices due to prudent procurement of RM. The company has expanded its garment capacity to meet increasing demand and better its profitability. Garment capacity is now around 95 mn pieces, doubled in last 2 years and they are now one of the largest in the country. Now, the company is planning to increase its processing capacity to further expand profitability. With higher capacity, now the company has started targeting the US market as well, for higher growth. Considering new garment capacity on stream, doubling processing capacity plan, recent government support for garment industry and recovery in sugar price, we have revised our estimates upwards. We have assigned slightly higher PE multiple considering the overall business shift towards value added yarn and garments along with better visibility. We have revised price target upwards to Rs 1303 per share, 13xFY18E EPS. The stock of the company still offers ~13% gain from current levels. Thus, we maintain Accumulate rating.

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East India Securities Ltd

Venkys Target: Rs 619.00
12 Sep 16

Result Update

Dear Sir/Madam, Venky’s (India) Ltd Q1FY17 Result Update CMP: Rs 525 Target: Rs 619 Previous Rating: Buy Current Rating: Accumulate A good growth at top-line level: We have been expecting a strong performance during 1QFY17 on account of strong chicken prices throughout the quarter. However the performance was way above expectations. The company witnessed 15% higher total revenues on yoy basis, better than our estimates. This was led by Poultry business which contributed around 50% of the sales, grew by strong 21% during the quarter. Oilseed business witnessed a moderate growth of 9% and contributed 43% of sales. Animal Health Products business which contributed 7% of the business, also posted a growth of 16%. A good expansion in margins on higher realizations: EBITDA margin was 12.9%, way above our estimates, as compared to 7.6% in Q4FY16 and 7.6% in Q1FY16. The yoy margin expansion was on higher realizations. All major cost heads (all as % of sales) were down and that led to a strong margin expansion. Poultry business contributed huge at operating level, with margin of 19% vs 10.9% in Q4FY16. Oilseed business margin was also good at 4.9% vs 4.1% seen during previous quarter. Animal Health products margins were slightly disappointing at 16.3% vs 18.7% in Q1FY16. Higher margins on YoY basis led to a good growth of 95% yoy at EBITDA level. A strong performance at net level: Lower depreciation and slightly higher incomes helped the profitability. And finally, the company reported a huge growth of 185% at net level. Outlook and Valuation: A strong performance of Q4FY16 was maintained and Q1FY17 was a very strong quarter with many positive surprises. The company posted a set of strong performance on higher chicken prices during most part of the quarter despite cost of production has been going up in recent times. The company’s performance depends a lot on volatile chicken prices. Venky’s (India) has been taking steps towards production rationalization for a long time and that seems to be working now. Going forward, we expect chicken prices to stabilize at improved levels on yearly basis with volatility during the year due to seasonality. And this will help margin expansion on full year basis in coming years as cost of production is still in control. We have revised FY17 and FY18 earnings estimates upwards taking strong 1QFY17 into account. Our upwardly revised TP is Rs 619 (10x FY2018E EPS). The stock of the company witnessed a good rally recently. Now it offers ~16% upside from current levels. Hence, we change our rating from Buy to Accumulate on the stock of the company.

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East India Securities Ltd

Astral Poly Tec Target: Rs 530.00
23 Aug 16

Result Update

Dear Sir / Madam, Astral Poly Technik Q1FY17 Result Update CMP: Rs 484 Target: Rs 530 Previous Rating: Accumulate Current Rating: Accumulate Good growth at sales: Astral Poly's standalone top-line grew by 16% to Rs 3171.5 Mn. The sales growth came on account of 21.2% growth in sales volume to 19,355 MT. Sales performance was more or less in-line with our estimate. A hit in realization was due to CPVC raw material price drop and fall in crude prices which hurt the overall growth. Margin contracted on yoy basis: In recent time, the company's margins had been under pressure due to steep fall in crude prices. On YoY basis margin was down by 160 bps to 12.8%. EBITDA grew by 3.5% to Rs. 407.5 Mn as against Rs. 393.8 Mn in the same quarter previous year. However, margin is improving sequentially with stable crude price and CPVC RM price cut given by Lubrizol during later half of FY16. PAT grew at moderate pace: Lower interest costs along with higher other income aided profits. Effective tax rate was lower at 34.5% vs 36.1% seen during Q1FY16. Finally, the company reported a 7.3% growth at net level to 161.2 Mn which was slightly below estimates. During the quarter, pipe business grew by 15.9% whereas adhesives business witnessed a growth of 18.8%. Overall, on consolidated basis, revenues was up by 16.7% but PAT was up by slower 8.5% due to lower margins in plastic business on yoy basis. Adhesive business witnessed some margin improvement. Outlook and Valuation: Astral had been witnessing subdued performance in recent times due to steep fall in polymer prices and slowing economy. A late reaction by Lubrizol in cutting CPVC RM prices hurt the growth prospect. But new strategic tie-up with Japanese player Sekisui for CPVC resin procurement and backward integration for converting resin to compound are expected to improve margins Q3FY17 onwards. With polymer prices stabilizing, Astral has started taking small price hikes in PVC businesses. Besides fundamentally strong pipe business, its newly acquired subsidiaries in adhesive & sealant businesses promise a great future on account of several synergies with Astral and almost doubling the capacity of adhesives during FY17. Incorporating better future we have slightly upgraded our FY18 projections and our SOTP based target price is now Rs 530 per share. After some recent run up, the stock still offers ~10% upside from current level. Thus, we maintain our Accumulate rating on the stock of the company.

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East India Securities Ltd

Talbros Auto Target: Rs 171.00
11 Aug 16

Result Update

Dear Sir / Madam, Talbros Automotive Components Q1FY17 Result Update CMP: Rs 114 Target: Rs 171 Previous Rating: Buy Current Rating: Buy Key highlights of the results: Good performance at top-line level: Consolidated net sales for the quarter grew by 11.7% to Rs 1,071.3 Mn, whereas the Standalone revenues grew by 10.8% to Rs 843.8 Mn. Gasket sales growth was at 11.7% on YoY basis and 1.5% on QoQ basis. Forging business continued to be a pain with sales down by 5.6% on YoY basis, however revival seen with 6.3% growth on sequential basis. Nippon Leakless Talbros (NLT) sales remained flat on YoY as well as QoQ basis. Magnetti Marelli Talbros Chassis System (MMT) sales grew at a substantial pace of 28.6% on YoY basis, flat on QoQ basis. Talbros Marugo Rubber (TMR) sales grew at a staggering 58.3% on YoY basis, 31.0% on QoQ basis. Higher EBITDA margin due to decline in costs on all counts: Consolidated EBITDA margins expanded by 65 bps on YoY basis led by decline in costs on all counts while on QoQ basis, EBITDA margins expanded by 149 bps. Raw Material as a % of sales decreased from 56.9% to 56.8%, an 8 bps improvement. Other manufacturing expenses as a % of sales decreased from 19.4% to 19.3%, a 13 bps improvement. Employee cost as a % of sales decreased from 13.8% to 13.4%, a 46 bps improvement. Higher other income, lower interest expense and lower tax rate led good PAT growth: Consolidated PAT grew by 37.1% to Rs 30.6 Mn in Q1FY17 as compared to Rs 22.3 Mn in Q1FY16. Growth in PAT can be attributed to various factors such as higher other income, lower interest expense and tax rate. Other income saw a 111% jump mainly due to divided income of Rs 48 lakhs received from NLT as against Nil. Interest cost declined marginally by 2.2% to Rs 44.0 Mn in Q1F17 as compared to Rs 45.0 Mn in Q1FY16. Tax rate was lower at 29.65% in Q1FY17 as compared to 34.7% in Q1FY16. Outlook & Valuation: The company has finally seen a turnaround with first double digit sales growth in nearly six quarters. Its core gasket business commands 38% of the gasket market in India. The company has been continuously diversifying its product portfolio by new product launches and increasing client footprint. The positive impact of new orders from various OEMs, expectation of good monsoon, expected boost in demand due to 7th pay commission and GST implication, are expected to drive strong performance in FY17 and FY18, with improving EBITDA margin. Based on these factors, we maintain our DCF based target price of Rs 171 per share (9.5x FY18E EPS). The stock offers a 49% upside from current level. Thus, we maintain our Buy rating.

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East India Securities Ltd

Nitin Spinners Target: Rs 155.00
08 Aug 16

Dear Sir / Madam, Nitin Spinners Limited Q1FY17 Result Update CMP: Rs 73 Target: Rs 155 Previous Rating: Buy Current Rating: Buy Key highlights of the results: Flat performance at top-line level: The company’s utilisation level continued to remain at ~100% while realisation has witnessed a marginal drop on YoY basis. Hence, net sales for the quarter de-grew by 1.4% to Rs 1,937 mn, slightly better than our estimates. On sequential basis also utilisation levels sustained at full capacity, but yarn realisations witnessed a marginal rise translating to a net sales growth of 1.8%. EBITDA margin decline was on expected line: EBITDA for the quarter de-grew by 18.3% on YoY basis to Rs 309 mn while margins contracted by 329 bps to 16.0%. Contraction in EBITDA was on account of increasing costs on all major counts. Raw Material as a % of sales increased from 59.3% to 60.0%, a 72 bps increase. Effective 1st May 2016, the Government of Rajasthan has levied an additional surcharge on power and hence Other manufacturing expenses led by power costs as a % of sales increased from 15.8% to 17.9%, a 209 bps increase. On account of annual salary hikes, employee cost as a % of sales increased from 5.7% to 6.2%, a 48 bps increase. Sequentially, EBITDA was flat while EBITDA margin contracted by a small 29 bps. PAT surprise on account of lower interest cost and lower tax outgo: At the PAT level, the company saw a marginal rise of 3.8% on YoY basis. PAT came in at Rs 122 mn, above our estimates on account of lower finance cost and lower income tax. Interest cost declined sharply due to RIPS applicability (started from Q4FY16 onwards) on earlier long term loan. The tax rate for the quarter was also significantly lower at 19.8% vs 35.3% on account of tax subsidy on the ongoing capex. Sequentially, PAT was up by 7.5% supported by lower tax outgo. Outlook & Valuation: Considering steep rise in cotton prices, increased power cost due to additional surcharge levied and constraints to volume growth till Q3FY17 (as NSL is working at 100% utilization), the company has come out with a decent set of numbers with operating profit in-line with our expectations. Considering steep rise in cotton prices, there would be some pressure on margins going forward but as the new capacity comes on-stream towards the end of FY17, the company is expected to grow at a good pace. Considering RIPS benefits and lower tax outgo, we have maintained our projected financials for FY17 and FY18. At CMP of Rs 73, the stock is trading at 4.9x FY18E EPS. We have maintained our target price of Rs 155 per share, 10.5x FY18E EPS. The stock of the company offers 112% gain from current levels. Thus, we maintain our Buy rating.

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East India Securities Ltd

K P R Mill Target: Rs 1161.00
28 Jul 16

Result Update

Dear Sir/Madam, KPR Mill Ltd Q1FY17 Result Update CMP: Rs 1051 Target: Rs 1161 Previous Rating: Accumulate Current Rating: Accumulate A modest growth at top-line on account of strategically holding on to sugar inventory : KPR Mill's total consolidated revenue for the quarter grew by 6% to Rs 6660 Mn, slightly lower than our estimates. This growth came on the back of good growth from textile business. But against our expectation, sugar business fared poorly as management continue to hold the sugar inventory in the expectation of better realization in coming months. Margin slightly subdued on account of one-off expenses: Raw material cost and other costs as a % of sales were down by 70 bps to 59.6% and 100 bps yoy to 11.1% respectively. Higher employee costs as % of sales offset some positive impact of lower RM costs on YoY basis . And finally margin was slightly up on yoy basis at 19.8%, up 30 bps. Textile EBIT margin contracted to 15.4% from 16.5% in Q1FY16. Sugar EBIT margin was 16.6% vs 0.6% in Q1FY16. Overall EBIT margin was up by 70 bps on yoy basis on flat depreciation. Interest cost declined by 11% yoy. Other income came at Rs 68 mn vs Rs 64 in Q1FY16. Lower effective tax rate was at 22.4% vs 30.8% in Q1FY16. Overall PAT was up by 25%. Textile business reported good growth: Textile revenue for the quarter grew by 17.6% yoy (down 6.5% qoq) to Rs 5935.8 mn. Good growth in the garment business continue to support the overall growth. Sugar inventory retained in expectation of higher realization in near future: Sugar business fared poorly and revenue from this segment de-grew by 80.2% yoy (down 47.0% qoq), to Rs 145.3 mn. The management continue to hold most of the sugar inventory in the expectation of better realization. Decision for holding on to the sugar stock is working well currently as sugar prices are firming up. Outlook & Valuation: The company has expanded its garment capacity to meet increasing demand and better its profitability. Garment capacity is now around 95 mn pieces, doubled in last 2 years and they are now one of the largest in the country. Now, the company is planning to increase its processing capacity to further expand profitability. With higher capacity, now the company has started targeting the US market as well, for higher growth. Considering new garment capacity on stream, doubling processing capacity plan, recent government support for garment industry and recovery in sugar price, we have revised our estimates upwards. We have assigned slightly higher PE multiple considering the overall business shift towards value added yarn and garments along with better visibility. At CMP of Rs 1051, the stock is trading at 10.9xFY18E EPS. We have revised price target upwards to Rs 1161 per share, 12xFY18E EPS. The stock of the company still offers ~10% gain from current levels. Thus, we maintain Accumulate rating.

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East India Securities Ltd

Nitin Spinners Target: Rs 155.00
13 Jun 16

Initiating Coverage...

Dear Sir/Madam Nitin Spinners Limited – Initiating Coverage Rating: Buy CMP: Rs 64.5 Target Price: Rs 155 Nitin Spinners Ltd. (NSL), is a Rajasthan based manufacturer of 100% cotton yarn and knitted fabrics. The company was incorporated in 1992 and commenced production in 1993 with a small open-end facility and since then it has become one of the leading cotton yarn producers in India. Nitin has an installed capacity of 150,096 spindles, 2,936 rotors and 49 knitting machines, which can produce 37,800 tonnes of cotton yarn and 8,600 tonnes of knitted fabric per annum. The company’s sales, EBITDA and adjusted PAT have grown at a CAGR of 13.3%, 12.6% and 16.4% respectively during FY11-FY16. During FY16, the company’s total revenues stood at Rs 7,669 Mn (Cotton yarn – 77%, knitting – 19%, other sources such as trading, waste and job works – 4%). Nitin generated 69% of its revenues from exports and enjoys presence in more than 40 countries across the globe. Domestic revenues contributed 31% and NSL has marquee clients like Arvind, Siyaram, Raymond, D'décor, Donear, etc. Investment Rationale: • Pedigreed, Prudent and Visionary Promoters – NSL is promoted by Mr. R. L. Nolkha who has spent around 25 years in the Industry before setting up NSL. Over the last 25 years, the Nolkha family has grown the business very efficiently and have successfully navigated the challenges and threats. NSL’s expansions have been prudently planned in order to keep gearing in check and the management has consciously capped the interest cost to sales at 5%. The management’s long term vision is to reach half a million spindles of yarn capacity. As a part of forward integration, the company also plans to enter fabric processing and value added products which will boost profitability. • Healthy returns – The company has been successful in maintaining best among the industry operating metrices resulting in a healthy RoAE (FY16 – 23.7%, FY15 – 27.4%) and RoACE (FY16 – 17.7%, FY15 – 16.7%) consistently during past couple of years. We believe that NSL will further enhance return ratios on account of richer product mix. • Well timed capacity expansion – NSL timed its capacity expansion very well by doubling capacity in 2014 to 150,096 spindles which helped it capture the textile up cycle. The company’s yarn utilization level has already reached 100% and NSL is adding another ~73,000 spindles by March 2017. These expansions would give a big boost to earnings. • Attractive valuations – NSL is trading at 4.4x FY18E earnings which is very cheap considering the many merits and strengths. We initiate coverage with a buy rating and a TP of Rs 155. Key Risks: • Commodity risk – The company is a 100% cotton yarn manufacturing company and cotton is its major raw material (60% of sales). Significant change in cotton prices may affect margins.

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East India Securities Ltd

Grauer & Weil Target: Rs 33.00
02 Jun 16

Result Update

Dear Sir/ Madam, Grauer and Weil (India) Ltd Q4FY16 Result Update CMP: Rs 28 Target: Rs 33 Previous Rating: Buy Current Rating: Accumulate Good top-line growth: Total revenue for Q4FY16 grew by 10% to Rs 1337 mn. This was on account of good growth in the engineering and mall business. It was also led by healthy growth in the paints and oils business. For FY16, total revenue grew by just 1% to Rs 4127 mn on standalone basis. It grew 1% to Rs 4148 mn on consolidated basis as well. Despite margin contraction PAT saw a good growth: RM cost as a % of sales was up by 90 bps yoy to 51.6%. This, along with higher manufacturing expenses (up 81 bps yoy) and higher employee cost (up 93 bps yoy) dragged down the EBITDA margin by 148 bps on yoy basis which came in at 17.3%. However, interest cost declined by 35% yoy for Q4FY16 and other income came in at Rs 8 mn in Q4FY16, which was Rs -1 mn in Q4FY15. Tax rate was lower at 37% compared to 44% in Q4FY15. This resulted in the PAT to grow 24% on yoy basis to Rs 102 mn (up 33% qoq). The company reported an exceptional cost of Rs 25 mn during Q4FY16 due to diminution in value of investments (Q4FY15 Rs 13 mn). For FY16, on standalone basis the company reported an exceptional cost of Rs 49 mn on account of Voluntary Retirement Scheme, paid Rs. 23.8 mn during Q1FY16 and Q4FY16’s Rs 25 mn. Engineering and mall business outperformed, Chemical business was flat: Chemical revenue for the quarter was flat (up 13% qoq) at Rs 848 mn due to lower commodity prices resulting in lower realizations, whereas the engineering segment after many quarters of de-growth showed some signs of recovery and grew by 74% during the quarter to Rs 217 mn (up 800% qoq). The mall business grew by 35% yoy (up 40% qoq) to Rs 79 mn, which is primarily due to increase in rental given to its primary client Food Bazzar. The paint business grew by 3% yoy (up 43% qoq) to Rs 181 mn, whereas the oil business grew by 9% yoy (down 9% qoq) to Rs 24 mn. Good operating profit across the segments: Chemical EBIT margin contracted to 23.9% during Q4FY16 from 29.1% in Q4FY15 (28.8% in Q3FY16). Engineering EBIT was positive in Q4FY16 at 10.3% from -14.7% in Q4FY15 (-117.8% in Q3FY16). Mall EBIT margin contracted to 47.2% during Q4FY16 from 51.4% in Q4FY15 (15.8% in Q3FY16). Paint EBIT was positive during the quarter at 7.9% from -5.1% in Q4FY15 (-18.9% in Q3FY16). Oils EBIT was positive during the quarter at 13.1% from -3.2% in Q4FY15 (16.2% in Q3FY16). Outlook & Valuation: Overall it was a good quarter, led by engineering and mall business. Though Grauer is a market leader in electroplating chemicals and it will have moderate growth from this business, its focus on the paint business would drive the future growth of the company. With the change in the macro-economic situation, we expect the company to perform better in coming years. At current market price of Rs 28 per share, the stock is trading at 10.9x FY18E EPS. We have maintained our FY17 earnings estimates and introduced FY18 financial projections. We have rolled over valuations to FY18E EPS. Our revised TP is Rs 33.1 (12.9x FY2018E EPS) which suggests ~18% upside from current level, despite recent run up in the share price. Hence, we change our rating from BUY to ACCUMULATE on the stock.

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East India Securities Ltd

Astral Poly Tec Target: Rs 500.00
01 Jun 16

Result Update

Dear Sir/Madam, Astral Poly Technik Q4FY16 Result Update CMP: Rs 451 Target: Rs 500 Previous Rating: Accumulate Current Rating: Accumulate Moderate growth at sales: Astral Ploy's standalone top-line grew by 14.2% to Rs 4286.8 Mn. The sales growth came on account of 11.8% in production volume of 22,620 MT. Sales volume was higher at 25,521 MT, but a hit in realization due to CPVC raw material price drop and fall in crude prices hurt the overall growth. Sales performance was more or less in-line with our estimates. During FY16, standalone top-line grew by 6.4%. Slower growth was account of steep fall in crude prices, lower CPVC prices, closure of Baddi operations and implementation of SAP. Margin improved sequentially: In recent time, the company's margins had been under pressure due to steep fall in crude prices, leading to inventory losses and lower realizations. During 4Q, the company witnessed a good improvement of 240 bps QoQ with improved realizations. However, on YoY basis it was mostly flat. During Q3FY16, Astral had to book an inventory loss of around 80 Mn and take a hit of around 10 Mn due to closure of its Baddi plant. In the absence of the same, other expenses as a % of sales were way lower at 9.4% vs 13.2% in Q3FY16. EBITDA grew by 15.7% to Rs. 532.9 Mn as against Rs. 460.6 Mn in the same quarter previous year. PAT grew at healthy pace: Lower interest costs along with lower tax rate aided profits. Effective tax rate was lower at 29.6% vs 45.7% seen during Q4FY15. Finally, the company reported a 44.7% growth at net level to 239.9 Mn which was slightly below estimates. On Consolidated basis, revenues was up by 13% but PAT was up by 101.7% due to higher margins and lower effective tax rate. Outlook and Valuation: Astral had been witnessing subdued performance in recent times due to steep fall in polymer prices and slowing economy. A late reaction by Lubrizol in cutting CPVC RM prices hurt the growth prospect. But now most of the things are at right place and Astral can again go back to high growth path in some time. With polymer prices stabilizing and Astral has started taking small price hikes in PVC businesses. Continuous introduction of new products along with capacity expansion make company’s future prospects look quite bright. Besides fundamentally strong pipe business, its newly acquired subsidiaries in adhesive & sealant businesses promise a great future on account of several synergies with Astral. Incorporating subdued FY16 performance, we have cut down our future projections, however our SOTP based target price remains at same level of Rs 500 per share. After some recent run up, the stock now offers over 10% upside from current level. Thus, we change our rating from Buy to Accumulate.

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East India Securities Ltd

Venkys Target: Rs 541.00
30 May 16

Result Update

Dear Sir/Madam, Venky’s (India) Ltd Q4FY16 Result Update CMP: Rs 411 Target: Rs 541 Previous Rating: Accumulate Current Rating: Buy A strong growth at top-line level: We have been expecting a strong performance during 4QFY16 on account of strong chicken prices throughout the quarter. And mostly the company performed on the similar lines. The company witnessed 22% higher total revenues on yoy basis, slightly better than our estimates. This was led by Oilseed business which contributed around 49% of the sales, grew by huge 52% during the quarter. Poultry business which witnessed a small growth of 2% and contributed 45% of sales. Animal Health Products business which contributed 6% of the business, also posted a growth of 5%. A good expansion in margins on higher realizations: EBITDA margin was 7.6%, way above as compared to 3.7% in Q3FY16 and 6.1% in Q4FY15. The yoy margin expansion was on higher realizations. On yoy basis, lower other expenses and employee costs during the quarter negated the impact of higher RM costs (all as % of sales). Poultry business contributed huge at operating level, with margin of 10.9% vs just 2% in Q3FY16 but it was flat on yoy basis. Oilseed business margin was also good at 4.1% vs 2.6% seen during same period last FY. Animal Health products margins were slightly disappointing at 13.6% vs 21.5% in Q4FY15. Higher margins on YoY basis led to a good growth of 50% yoy at EBITDA level. A strong performance at net level: A strong growth at sales and good margin expansion led to a strong 56% growth at the net level to Rs 161.5 Mn during the quarter. Outlook and Valuation: A very strong performance of Q1FY16 was not maintained during both Q2FY16 and Q3FY16, but Q4FY16 was a strong comeback. The company posted a set of strong performance on higher chicken prices during most part of the quarter despite cost of production has been going up in recent times. The company’s performance depends a lot on volatile chicken prices. The company has been taking steps towards production rationalization for a long time and that seems to be working now. Going forward, we expect chicken prices to stabilize at improved levels. And this will help margins in future as cost of production is still in control. We have revised FY17 earnings estimates upwards and introduced FY18 earning estimates. We have rolled over valuations to FY18E EPS. Our upwardly revised TP is Rs 541 (10x FY2018E EPS) which suggests ~32% upside from current level. Hence, we upgrade our rating from Accumulate to BUY on the stock.

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East India Securities Ltd

Awanish Chandra

VP, Institutional Equities

Monarch Networth Capital

Bulls Eye

Awanish Chandra

Venkys Target: Rs 561.00
07 Dec 16

Result Update

Astral Poly Tec Target: Rs 500.00
18 Nov 16

Result Update

Talbros Auto Target: Rs 171.00
17 Nov 16

Result Update

Grauer & Weil Target: Rs 42.20
11 Nov 16

Nitin Spinners Target: Rs 155.00
09 Nov 16

Result Update

K P R Mill Target: Rs 1303.00
27 Oct 16

Result Update

Venkys Target: Rs 619.00
12 Sep 16

Result Update

Astral Poly Tec Target: Rs 530.00
23 Aug 16

Result Update

Talbros Auto Target: Rs 171.00
11 Aug 16

Result Update

Nitin Spinners Target: Rs 155.00
08 Aug 16

K P R Mill Target: Rs 1161.00
28 Jul 16

Result Update

Nitin Spinners Target: Rs 155.00
13 Jun 16

Initiating Coverage...

Grauer & Weil Target: Rs 33.00
02 Jun 16

Result Update

Astral Poly Tec Target: Rs 500.00
01 Jun 16

Result Update

Venkys Target: Rs 541.00
30 May 16

Result Update

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Awanish Chandra

VP, Institutional Equities

Monarch Networth Capital

Bulls Eye

Awanish Chandra

Venkys Target: Rs 561.00 07 Dec 16

Astral Poly Tec Target: Rs 500.00 18 Nov 16

Talbros Auto Target: Rs 171.00 17 Nov 16

Grauer & Weil Target: Rs 42.20 11 Nov 16

Nitin Spinners Target: Rs 155.00 09 Nov 16

K P R Mill Target: Rs 1303.00 27 Oct 16

Venkys Target: Rs 619.00 12 Sep 16

Astral Poly Tec Target: Rs 530.00 23 Aug 16

Talbros Auto Target: Rs 171.00 11 Aug 16

Nitin Spinners Target: Rs 155.00 08 Aug 16

K P R Mill Target: Rs 1161.00 28 Jul 16

Nitin Spinners Target: Rs 155.00 13 Jun 16

Grauer & Weil Target: Rs 33.00 02 Jun 16

Astral Poly Tec Target: Rs 500.00 01 Jun 16

Venkys Target: Rs 541.00 30 May 16

Venkys Target: Rs 561.00
07 Dec 16

Astral Poly Tec Target: Rs 500.00
18 Nov 16

Talbros Auto Target: Rs 171.00
17 Nov 16

Grauer & Weil Target: Rs 42.20
11 Nov 16

Nitin Spinners Target: Rs 155.00
09 Nov 16

K P R Mill Target: Rs 1303.00
27 Oct 16

Venkys Target: Rs 619.00
12 Sep 16

Astral Poly Tec Target: Rs 530.00
23 Aug 16

Talbros Auto Target: Rs 171.00
11 Aug 16

Nitin Spinners Target: Rs 155.00
08 Aug 16

K P R Mill Target: Rs 1161.00
28 Jul 16

Nitin Spinners Target: Rs 155.00
13 Jun 16

Grauer & Weil Target: Rs 33.00
02 Jun 16

Astral Poly Tec Target: Rs 500.00
01 Jun 16

Venkys Target: Rs 541.00
30 May 16