Buy Orient Refractories; target of Rs 170: Centrum

EBITDA was well above our estimates and stood at Rs 254mn (up 13% YoY), with solid margins of 19.8% (up 20bps YoY). Gross margins were flat QoQ at 45.1% and other expenses remained under control led by management’s focus on cost control and improving manufacturing processes. PAT stood at Rs 167mn, up 12% YoY.

OutlookWe maintain Buy on Orient Refractories (ORL), with a revised TP of Rs 170 as the growth story remains on track with demonetisation blues successfully fended off and demand returning to normal already. Q3 performance surprised positively (EBITDA up 13% YoY with margins of 19.8%) driven by solid revenue growth of 11% YoY and relentless cost control measures. We remain structurally positive on ORL and believe that the tremendous scope for brownfield expansion, low capital costs, focus on reducing operational costs, MNC parentage and strong return ratios make it a compelling bet for long-term growth investors.