CRISIL assigns valuation grade of 2/5 to Responsive Inds

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CRISIL assigns valuation grade of 2/5 to Responsive Inds

CRISIL Research has come out with its report on Responsive Industries. The research firm has maintained the fundamental grade of 4/5 to the company in its February 7, 2012 report.

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Responsive Ind BSE | NSE 31/05/12 Are Mutual Funds betting on Responsive Ind?

CRISIL Research has come out with its report on Responsive Industries . The research firm has maintained the fundamental grade of 4/5 to the company in its February 7, 2012 report.

Responsive Industries Ltd's (Responsive's) Q3FY12 standalone revenues (PVC flooring and other PVC products) were in line with CRISIL Research's expectations. EBITDA and PAT were lower than expected on account of higher raw material costs. Consolidated revenues were in line with estimates, but EBITDA and PAT margins disappointed. We may lower our estimates post interaction with the management. We maintain our fundamental grade of 4/5.

Q3FY12 standalone result analysis
• Revenues increased by 21% q-o-q (up 41% y-o-y due to new capacities coming on stream) to Rs 2,715 mn.

• EBITDA margin declined by 487 bps q-o-q to 9.1% due to increase in raw material cost by 532 bps to 79.3%. We await clarity from management on the same.

• Decrease in EBITDA margin coupled with increase in interest cost (62% q-o-q to Rs 19 mn) led to lower PAT of Rs 41 mn against Rs 114 mn in Q2FY12. Accordingly, EPS was Rs 0.16 vis-à-vis Rs 0.44 in Q2FY12.

Q3FY12 consolidated result analysis
• Consolidated revenues increased by 14.7% q-o-q to Rs 4,283 mn.

• EBITDA margin declined by 696 bps to 9.6% primarily because raw material cost as a % of sales increased by 495 bps to 79.6%. Also raw material cost increased for the shipping ropes subsidiary - Axiom Cordages - by 421 bps to 80%.

• The company reported PAT of Rs 131 mn against Rs 280 mn in Q2FY12. Accordingly, EPS was Rs 0.50 vis-à-vis Rs 1.07 in Q2FY12.

• The company started reporting its consolidated numbers from Q1FY12.

Valuation: Current market price has downside
We value Responsive based on the discounted cash flow method with a fair  value of Rs 107. At the current market price of Rs 129, the stock merits a valuation grade of 2/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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