Buy Solar Industries; target of Rs 976: KRChoksey

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Buy Solar Industries; target of Rs 976: KRChoksey

KRChoksey is bullish on Solar Industries India and has recommended buy rating on the stock with a target of Rs 976 in its February 13, 2012 research report.

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KRChoksey is bullish on Solar Industries India and has recommended buy rating on the stock with a target of Rs 976 in its February 13, 2012 research report.

"Solar Industries reported its Q3FY12 results in line estimates with a 28.8% increase in Topline sequentially and 60% increase y-o-y. The company recorded a Topline of Rs 266 Crs v/s our estimates of Rs 275 Crs (3% variance)."

"EBITDA increased 31.5% sequentially and 66.1% y-o-y. EBITDA Margins improved marginally by 38 bps sequentially and 64 bps y-o-y on the back of lower other expenditure. The company recorded a PAT before minority interest of Rs 29.2 Crs in line with our estimates of Rs 30 Crs for the current quarter; however the adjusted Net Profit for the quarter was Rs 26 Crs. Net Profit Margins declined by 16 bps q-o-q and 198 bps y-o-y basis on the back of higher finance charges. Contribution from Explosives business to the topline was Rs 228 Crs and trading business contributed Rs 38.4 Crs. Explosive sales increased 19% sequentially and 52% y-o-y with an EBITDA growth of 66% y-o-y. EBITDA margins for the explosives segment surged by 50bps sequentially to 19.9% v/s 19.4% in Q2FY12. Topline from Trading segment saw a 160% on sequential basis and 134% y-o-y"

"We believe new capacities in Africa and Turkey is expected to augment exports leading to margin expansion, which coupled with value unlocking from coal block can lead to significant upside in the stock. Historically the stock has traded in the PE band of 8-14x, we continue to maintain our BUY recommendation on Solar with a Rs 976/share valuing the core business at 13x FY13E earnings coupled with a Rs 234.9/Share NPV value assigned to the coal block, a potential upside of 17.9% from current levels," says KRChoksey research report.  

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To read the full report click on the attachment