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CRISIL maintains valuation grade of 5/5 to Alok Industries

Published on Tue, Mar 06, 2012 at 16:40 | Source : Moneycontrol.com

Updated at Tue, Mar 06, 2012 at 16:46

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Alok Industries

BSE | NSE 30/05/12

Are Mutual Funds betting on Alok Industries?

CRISIL Research has come out with its report on Alok Industries . The research firm has maintained the fundamental grade of 3/5 to the company in its March 5, 2012 report.

Alok Industries Ltd's (Alok's) Q3FY12 standalone revenues and profitability were in line with CRISIL Research's expectations. Both domestic and export sales boosted revenue, with domestic sales registering 60% y-o-y growth. Although we remain cautious about Alok considering the slowdown in export markets, we believe it will be able to withstand this temporary slowdown given its scale of operations and backward integration. Its high debt level (Rs 112 bn - 9MFY12) and timely exit from the real estate business remain key monitorables. We maintain our fundamental grade of 3/5.

Q3FY12 result analysis (standalone)
� Revenues grew by 48% y-o-y to Rs 23.8 bn mainly on account of the polyester and woven fabric segments. Exports grew by 30% y-o-y, while domestic sales increased 60% y-o-y to Rs 16 bn.

� EBITDA margin expanded y-o-y by 106 bps to 27%, despite increasing share from the low-margin polyester business. The expansion was largely on account of the rupee depreciation benefits that it derived from exports.

� Interest cost for the company stood at Rs 2,713 mn in Q3FY12 as against Rs 1,303 mn Q3FY11. This was mainly on account of higher interest rate and lower interest capitalisation as the expanded capacity started operations. Depreciation stood at Rs 1,975 mn, 30% higher y-o-y.

� The company continues to make provision for forex losses. As on December 2011, losses stood at Rs 3,394 mn; however, these losses dropped to ~Rs 1,400 mn due to strengthening of the rupee against the dollar in January 2012.

� Due to higher revenue and healthy operating profitability, adj PBT increased by 22% y-o-y to Rs 1,855 mn in Q3FY12. However, adj PBT margin contracted to 7.8% in Q3FY12 due to higher interest and depreciation. Reported EPS stood at Rs (0.5) as against Rs 1.2 in Q3FY11.

Key monitorable
� Timely exit from real estate - There has been considerable delay in Alok's exit from the real estate business which has impacted its balance sheet. The company has only been able to sell only a single floor of its 20 floors in the Peninsula Business Park.

Valuation: Current market price has strong upside
We continue to use the discounted cash flow method to value Alok. We maintain our fair value at Rs 29 per share. Based on the current market price, our valuation grade is 5/5.

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.