Buy Surya Roshni; target of Rs 137: Angel Broking

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Buy Surya Roshni; target of Rs 137: Angel Broking

Angel Broking is bullish on Surya Roshni and has recommended buy rating on the stock with a target of Rs 137 in its May 6, 2011 research report.

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Angel Broking is bullish on Surya Roshni and has recommended buy rating on the stock with a target of Rs 137 in its May 6, 2011 research report.

"Surya Roshni reported a strong set of numbers for 4QFY2011. The top line grew by 46.6% yoy to Rs739cr (Rs504cr), which was well above our estimate of Rs609cr. OPM also came in strong at 10.8%, reporting a 109bp yoy increase compared to 9.7% in 4QFY2010. PAT for the quarter grew by 37.5% to Rs40cr (Rs29cr) on the back of higher sales, margin expansion and nil tax rate because of adjustments. The company has expanded its capacity across products in the recent years. Going ahead, we expect this additional capacity to increase sales contribution, thereby driving the company's growth. At the CMP of Rs95, the stock is trading at attractive valuations."

"Both the segments contributed to the company's stellar sales growth, with the steel products division growing by 41.1% yoy and the lighting division posting 61.4% yoy growth. Margin came in at 10.8%, as against our expectations of 7.1%, owing to higher-than-expected gross margins."

"We remain positive on the company's business outlook, owing to large capacity expansion and strengthening presence in the lighting space. Considering the above-expectation performance during the quarter, we have increased our sales estimates for FY2012E and FY2013E by 6.5% and 7.8% to Rs2,870cr and Rs3,391cr, respectively, while OPM estimates have been increased by 38bp and 48bp to 7.7% and 7.6%, respectively. PAT estimates for FY2012E and FY2013E have been increased by 0.5% and 7.5% to Rs89cr and Rs113cr, respectively. Overall, we expect the company to post strong PAT growth at a 30.3% CAGR over FY2011-13E. At the CMP, the stock is trading at an attractive valuation of 4.1x its FY2013E EPS. We maintain our Buy recommendation on the stock with a target price of Rs137," says Angel Broking research report.

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