Buy Pennar Industries, target of Rs 41: Karvy

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Buy Pennar Industries, target of Rs 41: Karvy

Karvy Stock Broking has maintained its buy rating on Pennar Industries with a traget price of Rs 41. At the current price of Rs 33, PIL is trading at 14.3x FY08 and 9.3x FY09 earnings.

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Karvy Stock Broking has maintained its buy rating on Pennar Industries with a traget price of Rs 41 in its April 22, 2008 research report. "Pennar Industries  (PIL), we expect profit before tax to grow by 45% (YoY) and to remain flat (QoQ). However, net profit is expected to decline, due to tax settlement for the entire year in the last quarter (Q4 FY08). PIL has paid only fringe benefit tax for first two quarters and in line with last year, the company is likely to pay balance tax in the last quarter. Hence, we have estimated a tax payment of Rs 65 million in this quarter. Effectively net profit for Q4 FY08 is estimated to be around Rs 45 million. This results into our estimated net profit of Rs 28.9 million for FY08, translating into EPS of Rs 2.3."

"At the current price of Rs 33, PIL is trading at 14.3x FY08 and 9.3x FY09 earnings. We value core earnings of PIL at Rs 33 per share, based on 8x of FY10 EPS. This is backed by EPS growth of 35% (CAGR) for FY08-FY10. To add that, PIL is likely to unlock value from real estate holding, that is estimated to be around Rs 8 per share. Hence, we reiterate our BUY rating on PIL with a price target of Rs 41 per share. At the current price, PIL is trading at EBITDA multiple of 8xFY08 and 6x FY09. Our target price also reflects an EBITDA multiple of 6x on FY10." says Karvy's research report.

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