Accumulate Bombay Rayon; tgt of Rs 234: Prabhudas Lilladher

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Accumulate Bombay Rayon; tgt of Rs 234: Prabhudas Lilladher

Prabhudas Lilladher has recommended accumulate rating on Bombay Rayon Fashions with a target of Rs 234 in its November 18, 2010 research report.

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Prabhudas Lilladher has recommended accumulate rating on Bombay Rayon Fashions with a target of Rs 234 in its November 18, 2010 research report.

"Bombay Rayon Fashions' (BRFL's) net sales grew by 35.4% YoY to Rs 5,232 million (up 4.1% QoQ) v/s our expectation of Rs 5,783 million. Fabric and garments volume grew by 91.2% and 11.2% YoY (up by 4.8% and 1.2% QoQ), respectively. EBITDA grew by 62.2% YoY to Rs 1480 million (up 15.7% QoQ) v/s our expectation of Rs 1412 million. Increased prices of raw material as well as finished goods during the quarter helped BRFL to improve its profitability as it was carrying low cost inventories. Further, the company's other expenses/sales ratio came down by 383bps to 8.6% (down 318bps YoY) on QoQ basis. It improved EBITDA margins by 284bps to 28.3% (up 453bps YoY). Interest cost has gone up by 48.1% YoY to Rs 333 million on account of increased debt. Gross debt has gone up to Rs 26.8 billion from 19.7 billion as on September 30, 2009 (v/s 24.8 billion as on March 31, 2010). Other income has increased by 1.2x to Rs 36 million. Adjusted PAT grew by 51.6% YoY to Rs 622 million (up 19.2% QoQ) v/s our expectation of Rs 590 million."

"BRFL's Tarapur fabric plant is operating at ~50% utilization level at present. The company is increasing its weaving capacity from 400looms to 760looms with the capex of Rs 4 billion that is expected to be commissioned by Q4FY11."

"BRFL has approved issuance of 10m warrants to its promoter group and GDR issue equivalent to 16m equity shares during the quarter. We are downward revising our FY11E and FY12E earnings estimate considering delay in capacity ramp up, higher interest burden and further equity dilution. Accordingly, we are downgrading our rating from 'BUY' to 'Accumulate' on the stock, with a revised target price of Rs 234 (P/E of 12x FDEPS of Rs 19.5)," says Prabhudas Lilladher research report.

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To read the full report click on the attachment