CRISIL assigns fundamental grade of 2/5 to Jasch Industries

“Jasch Industries Ltd’s (Jasch’s) Q1FY12 revenues were in line with CRISIL Research’s expectations but EBITDA margin was higher than expected. Improvement in margin was on account of higher contribution from the relatively better margin electronic gauge segment; on the back of execution of the Arcelor Mittal order. The company’s board has recommended its first ever dividend of Re 1 per share. We maintain the fundamental grade of 2/5.”

“Q1FY12 revenues grew by 12% y-o-y but declined by 13% q-o-q to Rs 198 mn. The EGS segment’s revenue increased 92% y-o-y on account of the completion of Arcelor Mittal’s US$1.1mn order. The PU/PVC segment’s revenues decreased by 8% y-o-y and 15% q-o-q due to lower demand. EBITDA margin improved 324 bps y-o-y to 13.0% due to better revenue mix and improvement in margins in both EGS and PU/PVC segments. EBIT margin increased by 354 bps and 46 bps y-o-y for the EGS and PU/PVC segments, respectively. Margin improvement in the EGS segment was due to higher share of better margin export sales due to execution of the Arcelor Mittal order. Margin improvement in the PU/PVC segment came from modernisation of the DMF recovery plant. PAT margin grew by 228 bps y-o-y and 82 bps q-o-q to 5.8% due to improved operating performance and lower effective tax. PAT increased by 85% y-o-y and 1% q-o-q to Rs 11.4 mn. Jasch reported an EPS of Rs 1.01 for Q1FY12 as compared to Re 1 in Q4FY11 and Rs 0.54 in Q1FY11. The company’s board has recommended its first ever dividend of Re 1 per share, yielding 5.6% on the current share price.”

“Jasch’s margin improvement in both the segments was higher than our expectations. The company reported EBITDA margin of 13% against our annual projection of 10.8%. Consequently, we have increased our EBITDA margin estimates. For FY12 and FY13, EBITDA margin estimates have been increased by 28 bps and 16 bps to 11.1% and 11.3%, respectively. We continue to use the discounted cash flow method to value Jasch. After factoring in the change in our margin estimates, our fair value has increased to Rs 16.6 per share from Rs 15.8 per share,” says CRISIL Research report.

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