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Buy India Glycols; tgt Rs 449: PINC
At the CMP of Rs 217, IGL is trading at an EV/EBIDTA of 2.4x and P/E of 2.2x FY10E earnings. While the 1st qtr nos were expected to be subdued, they turned out to be much lower than expected. However, the benign petrochemical cycle combined with flexibility of raw material impart greater flexibility in managing its costing.
PINC Research has recommended buy rating on India Glycols , with price target of Rs 449, in its report dated 6 August, 2008.
"India Glycols net sales declined by 8% YoY to Rs 2.5 billion. OPM slipped by 643 bps to 14% resulting in net profit plunging by 66% to Rs 121 million. A planned shut-down of 21 days for debottle-necking its MEG capacity at Kashipur and adding a new catalyst in the process, were the key reasons for lower volumes during the quarter. At the CMP of Rs 217, IGL is trading at an EV/EBIDTA of 2.4x and P/E of 2.2x FY10E earnings. While the first quarter numbers were expected to be subdued, they turned out to be much lower than expected. However, the benign petrochemical cycle combined with flexibility of raw material impart greater flexibility in managing its costing and we expect earnings traction Q2FY09 onwards. Hence, we maintain our 'BUY' recommendation with a price target of Rs 449".
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