Buy Everest Industries; target of Rs 328: SKP Securities

“Everest Industries (EIL), Incorporated in 1934, offers complete range of building solutions like Roofing, Ceiling, Wall, Flooring, Cladding, Door and Pre Engineered steel Buildings for the Industrial, Commercial & Residential sector. It enjoys 13% market share of AC roofing industry in India. EIL has a building products capacity of 7,10,000 MT and pre engineered steel building capacity of 30,000 tonnes.”

“Increased focus of government towards rural and infrastructure development and implementation of the various programs are expected to boost income for the rural poor thereby increasing the potential market for usage of fibre cement sheets in rural areas. In Union budget 2010-11 towards rural development, Rs 66,100 crore has been provided hence rural prosperity and liquidity will give long-term strength to the roofing market. India’s capex cycle is transforming after a deprived slowdown in new industrial activities in the last year. With incessant flow of new orders and better utilization we expect PEB segment to break even from current quarter onwards. Company has a healthy order book of 17000 tonne, executable in 7 months.”

“We expect steel building division to register a top line of Rs 175 crore and Rs 205 crore in FY12E and FY13E respectively. EIL is a pioneer in roofing segment with 76 years of experience. In the recent past, company has forayed into various values added segments like Ceiling Solutions, Wall Solutions, Floor Solutions, Cladding Solutions, Doors, and Roofing Solutions etc. to provide end to end solution in building construction. EIL has the most extensive distribution network in the building solution provider industry with nearly 6000 sales points spread across the country. In near future, company is planning to add few more retail outlets to tap the increment growth in demand of building products.”

“Everest Industries Ltd is one of India’s fastest growing building solutions company. Robust growth in rural income on back of vigorous government focus, turnaound in industrial capex cycle is demand drivers of roofing and steel building industry. At current market price of Rs 206, EIL is trading at P/E of 6.3x and 5.0x of FY12E and FY13E earnings of Rs 32.7 and 40.9 respectively. We recommend BUY rating on the stock with a target price of Rs 328 (59% upside) in 18 months at the P/E of 8x on FY13 earnings,” says SKP Securities research report.

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