Banswara Syntex (BSL) witnessed 13.6%YoY and 24.3% sequential jump in Q4FY2007. The company's OPM for Q4FY2007 were under pressure in Q4FY2007 due to higher fuel cost. We expect them to improve going forward. We expect the company to witness robust growth going forward driven by capacity additions and improving margins.
BSL has witnessed a robust bottom line growth of 71.4%YoY driven by some of its expansions commencing operations. The company's forward integration in to garments and diversification into cotton yarn will start yielding results going forward.
Further, with its captive thermal power plant commencing operations in Q1FY2008 the company will be able to improve its operating margins further. We introduce our FY2009E estimates.
We believe the company will witness a top Line and bottom line CAGR (FY2007-09E) of 34.3% and 56.4% respectively. At CMP of Rs 63 the stock discounts its FY2008E and FY2009E EPS of Rs 19.9 and Rs 27.4 at 3.2x and 2.3x respectively. We continue to maintain a BUY on the stock with a price target of Rs 120.
