Jan 16, 2013, 01.31 PM | Source: Moneycontrol.com
Sunidhi Securities is bullish on Shalimar Paints (SPL) and has recommended buy rating on the stock with a target price of Rs 165 in its January 15, 2013 research report.
, Sunidhi Securities |
"SPL has posted healthy results for the quarter ended December 2012. During Q3FY13, sales advanced by 14.4% to Rs 143.2 crore. However, net profit jumped by 23.7% to Rs 4.7 crore. OPM & NPM stood at 8.2% and 3.3% Vs 8.1% & 3.0% respectively in Q3FY12. During 9MFY13, net profit surged 24.7% to Rs 10.6 crore on 15.8% higher sales of Rs 388.8crore. OPM & NPM stood at 7.6% and 2.7% Vs 7.4% & 2.5% respectively.
SPL is promoted Ratan Jindal Group and the Jhunjhunwala Group - who jointly own 62.3% in the company. Mr. Ratan Jindal is the promoter director on the Board representing the Jindal Group. His flagship company is JSL Stainless, which is India's largest integrated manufacturer of quality stainless steel and caters to more than 40% of the total demand for stainless steel in the country.
Hong Kong based Hind Strategic Investments is promoted by Shyam Sunder Jhunjhunwala. The Hind Group is largely into hospitality and owns and manages high end luxury serviced apartments and hotels in HK & Singapore. In addition, the Hind Group has done various different property developments primarily in Singapore.
SPL has strong presence in both segments of the paint industry i.e. decorative paints & industrial paints and boasts of a complete range of products across all price points. SPL also has tinting systems under the brand name "Color Space" where it offers more than 9000 shades across all product lines to its customers. Under the decorative division, it markets several brands of architectural coatings - interior as well as exterior, enamels, primers, emulsions, distemper, wall putty etc. Whereas under industrial paints, it manufactures high performance coatings, can coatings, stoving systems, marine coatings along with new generation products like water based and high solid industrial paints, wood finishes, solvent borne paints and aviation coating.
SPL has a strong pan-India presence through a hub and a network consisting of Regional Distribution Centres (RDCs), depots and dealers for decorative paints, through which they cater to retail customers. SPL’s growth in both the Decorative and Industrial segments has been in line with industry growth. It has launched a new premium exterior emulsion and there has been a good response from the market for this product. In the Industrial segment strong growth has come from the Protective Coatings segment where SPL continues to be one of the leading suppliers in the country.
SPL has entered into tie-ups with large industrial painting contractors and are taking up turnkey contracts, called Apply Supply Contracts, for both maintenance jobs and new projects. With a large range of products in the mass-market or economy category, SPL is now moving up the ladder to premium and super premium categories.
The brand will focus now on the premium segment with new the launch of new product and will expand its presence in the high-growth markets such as south India. The manufacturing capacity will also be increased by over 50% by 2013-14, with a new facility in Chennai and expansion of the existing facilities. At the CMP of Rs 136, the share is trading at a P/E of 13.9x on FY13E and 11.2x on FY14E. We recommend BUY with a target price of Rs 165 in the medium," says Sunidhi Securities research report.
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