CRISIL maintains fair value of Rs 51 to Sangam India

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CRISIL maintains fair value of Rs 51 to Sangam India

CRISIL Research has come out with its report on Sangam (India). The research firm has maintained the fundamental grade of 3/5 to the company in February 24, 2012 report.

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Sangam India BSE | NSE 31/05/12 Are Mutual Funds betting on Sangam India?

CRISIL Research has come out with its report on Sangam (India) . The research firm has maintained the fundamental grade of 3/5 to the company in February 24, 2012 report.

Sangam (India) Ltd's (Sangam's) Q3FY12 revenue was lower than CRISIL Research's expectations. Its textile revenues dipped q-o-q and y-o-y to Rs 2,539 mn. EBITDA margin remained flat q-o-q at 10.7%. Considering the uncertain macro-environment, the company has tightened its working capital cycle and is operating at low inventory levels and debtor days. Sangam has bagged a new toll collection contract from National Highway Authority of India to operate toll booths in JNPT (Mumbai), while the existing contract in Bhilwara (Rajasthan) has been extended by four months. We have revised our earnings estimates to factor in incremental toll-collection revenues and lower short-term borrowing with lower working capital requirement. Given Sangam's established position in the domestic poly viscose (PV) yarn segment and its continued thrust on value addition, we maintain our fundamental grade of 3/5.

Q3FY12 result analysis:
• Revenues declined by 18% q-o-q (up 6.7% y-o-y) to Rs 3,079 mn. Revenues from the textile business de-grew by 23% q-o-q and 9% y-o-y to Rs 2,539 mn as PV yarn and fabric volumes de-grew owing to slowdown in the textile sector. The company's export revenue declined 40% q-o-q and 7% y-o-y to of Rs 558.2 mn as it had pushed most of its export sales to Q2FY12 to take the benefit of the Duty Entitlement Passbook Scheme (DEPB), which was to be retracted post September. The toll collection division, which commenced in Q3FY11, reported revenues of Rs 540 mn, as compared to Rs 466 mn in Q2FY12.

• Sangam's EBIT margin in the textile segment remained flattish q-o-q at 5.6%, while the EBIT margin in the toll segment declined to 2.4% from 6.8% in Q2FY12 on account of higher operating expenses.

• The company has reported Rs 62 mn of notional loss on account of mark-tomarket conversion of forex-based contracts in other expenditure. We have re-classified the same under extraordinary expenses.

• Sangam reported an adjusted net profit of Rs 44 mn as against Rs 60 mn profit in Q2FY12. It reported an adj EPS Rs 1.1 in Q3FY12 as against Rs 1.5 in Q2FY12.

Valuation: Current market is aligned
We continue to use the sum of the parts method to value Sangam and maintain our fair value of Rs 51.

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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