CRISIL maintains valuation grade of 3/5 to Rainbow Papers

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CRISIL maintains valuation grade of 3/5 to Rainbow Papers

CRISIL Research has come out with its report on Rainbow Papers. The research firm has maintained the fundamental grade of 3/5 to the company in its February 10, 2012 report.

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Rainbow Papers BSE | NSE 31/05/12 Are Mutual Funds betting on Rainbow Papers?

CRISIL Research has come out with its report on Rainbow Papers . The research firm has maintained the fundamental grade of 3/5 to the company in its February 10, 2012 report.

Rainbow Papers Ltd's (Rainbow's) Q3FY12 revenues were in line with CRISIL Research's expectations driven by higher trading income; revenue from the core business was lower. EBITDA and PAT were below expectations due to higher proportion of the low-margin trading business. Rainbow's new capacity continued to face stabilisation issues and will take longer than expected to stabilise. As a result, depreciation was lower than expected since the company is yet to capitalise assets of the new capacity. We will revise FY12 estimates post interaction with the management. We maintain our fundamental grade of 3/5.

Q3FY12 result analysis
• Revenues were up by 51% y-o-y (41.9% q-o-q) to Rs 1.6 bn driven by trading revenue of ~Rs 530 mn, which is significantly higher than in previous comparable quarters. Realisation increased by ~8% y-o-y (flat q-o-q) to Rs 31.7 per kg. The company sold 33,916 MT of manufactured paper as compared to 35,517 MT in Q2FY12 and 36,338 MT in Q3FY11.

• EBITDA margin declined by 335 bps y-o-y (and 466 bps q-o-q) to 17.6% due to higher proportion of revenue from trading, which has ~8-10% margins compared to ~20% margins from core operations.

• PAT margin declined by 152 bps y-o-y (57 bps q-o-q) to 8.2% primarily due to lower EBITDA margin.

• EPS for Q3FY12 was Rs 1.4 compared to Rs 1 in Q2FY12.

Valuations: Current market price is aligned
We continue to use the price-to-earnings ratio method to value Rainbow at Rs 67 per share. At the current market price of Rs 63, the valuation grade is 3/5.

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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