Buy Shetron; target of Rs 110: Keynote Capitals

Keynote Capitals Research has recommended buy rating on Shetron with a target of Rs 110 as per their report on December 03, 2007. "Shetron - a manufacturer of high quality metal packaging products. Government’s emphasis on the food processing sector. Packaging industry set to ride the boom in the food processing industry. Manufacturing facilities complying with global standards. To acquire group company Fibre Foils; scale up through further inorganic growth. With its high product quality, strong customer relationships and acquisitions, we believe Shetron is well poised to create substantial value of shareholders over the next 2-3 years. As per our estimates, p/e valuation works out to 16.3x FY08E, 11.8x FY09E and 7.9x FY10E. EV/EBITDA valuation comes to 8.3xFY08E, 6.2xFY09E and 4.5xFY10E. Since the full benefits of the expansion project will be available only in FY10, we feel the valuation of Shetron should be looked at from the FY10 perspective. Shetron’s ROCE will also reflect the profit-generating capability of the business by FY10. Even from the FY09 perspective, we believe a niche player like Shetron deserves a premium, of say 25% to the valuation of world leader Crown Holdings, by virtue of its unique positioning within the domestic industry, higher margins and tremendous growth potential, via both the organic and inorganic routes. We initiate coverage with a Buy and a 15-month price target of Rs 110." Says Keynote Capitals Research report.

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