Buy Innoventive Industries; target of Rs 140: Dolat Capital

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Buy Innoventive Industries; target of Rs 140: Dolat Capital

Dolat Capital is bullish on Innoventive Industries and has recommended buy rating on the stock with a target of Rs 140 in its February 7, 2012 research report.

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Dolat Capital is bullish on Innoventive Industries and has recommended buy rating on the stock with a target of Rs 140 in its February 7, 2012 research report.

"Innoventive Industries's (IIL) consolidated profits, at Rs198mn (up 5% QoQ), was marginally below estimates of Rs 208mn due to higher interest cost. Consolidated net sales rose 5% QoQ to Rs 1.97bn (Dolat Est: Rs 2.12bn), primarily led by strong growth in tubes and products segment. Sales in the OCTG and tubes & products divisions saw strong growth of 48.8%YoY and 55.2% YoY to Rs 271mn and Rs 1,113mn respectively. EBITDA grew by 6.9%QoQ to Rs 510 mn. EBITDA margins have increased by 130bps QoQ to 25.9% due to increase in proportion of higher margin tubes and OCTG business. Interest cost increased by 12.7%QoQ due to higher interest payout on foreign currency loans."

"Sales volumes for CEW tubes and ERW tubes declined by 6.7% and 0.4% sequentially to 5970 tonnes and 7969 tonnes. Realizations for CEW and ERW tubes increased by 3.8%QoQ and 4.9%QoQ respectively. Membrane panel strips volumes increased by 9.2% QoQ whereas realizations increased by 16.8% to Rs 67154per tonne. IIL exports have doubled over last 9 months and currently constitutes 25% of its turnover. Standalone net sales rose 7.4% QoQ to Rs 1.59bn and EBITDA increased by 22.5% to Rs 403mn. EBITDA margins improved sequentially by 310bps to 25.2%. Interest expenses increased by 14.8% QoQ to Rs 147mn. Tax rate increased sequentially by 290bps to 19%. Standalone PAT rose 16% QoQ to Rs 172mn. IIL expects to complete its capacity expansion of CEW tubes by 3x by June 2012 and expects to achieve 65% capacity utilization in FY13."

"We continue to maintain our positive stance on IIL givens its cost leadership in CEW tubes through pilgering process and its focus on innovation to develop new markets for its products. We expect IIL to report earnings CAGR of 37% over FY11-13E led by expansion in CEW tubes, strong traction in OCTG products and reduction in interest cost. We maintain our Buy on IIL with a price target of Rs 140 (7x FY13EPS)," says Dolat Capital research report.  

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To read the full report click on the attachment