Buy Tamil Newsprint: Emkay Global Financial Services

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Buy Tamil Newsprint: Emkay Global Financial Services

Emkay Global Financial Services is bullish on Tamil Newsprint and has recommended buy rating on the stock with a target of Rs 200 in its October 22, 2010 research report.

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ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about Tamil Newsprint See messages about Tamil Newsprint Tamil Newsprint BSE | NSE 31/05/12 Are Mutual Funds betting on Tamil Newsprint?

Emkay Global Financial Services is bullish on Tamil Nadu Newsprint and Papers and has recommended buy rating on the stock with a target of Rs 200 in its October 22, 2010 research report.

"Tamil Nadu Newsprint and Papers (TNPL) Q2FY11 results were broadly inline with estimates. Revenues increased by 10% yoy to Rs 3.0 billion driven by 1.2% growth in volumes to 62 thousand mt and 9.1% growth in average realisations to Rs 44,791 per mt. EBITDA margins improved by 70 bps yoy and remained at high levels of 31.6% as the company benefited from low cost captive pulp resulting in EBITDA of Rs 940 million, +12.2% yoy. EBITDA / mt improved to Rs 15000 / mt from Rs 13330 / mt previous year and Rs 14110 / mt in Q1FY11."

"On account of revenues growth and margin expansion, APAT increased by 45% yoy to Rs 408 million which was in line with our estimates of Rs 429 million. The company reported EO income of Rs 123 million (post tax) from sale of fuel and reported PAT of Rs 531 million which increased by 88% yoy. AEPS for the quarter stood at Rs 5.9 as against Rs 4.1 previous year. TNPL's commissioning of paper plant is delayed by one quarter however paper realisations are higher by ~5% than our previous estimates. Following which, we have revised our FY11E EPS estimates by 17% to Rs 22.3 (from Rs 19) and FY12E by 4% to Rs 24.8 (from Rs 23.9)."

"Strong H1FY11 results, ongoing capex, ability to captively source its pulp requirement and strong demand outlook for the paper industry, we are revising our target multiple on the company from earlier 6x to 8x. Simultaneously, we are revising our FY11E earnings estimates by 17% from earlier Rs 19 to Rs 22.3 and FY12E earnings estimates by 4% from Rs 23.9 to Rs 24.8. Subsequently, we are upgrading our target price by 40% from 143 to Rs 200 (based on 8x FY12E EPS) and maintain BUY. At our target price, the stock trades at P/BV of 1.3x, EV/EBITDA of 5.1x and EV/Sales of 1.8x. Valuations at current market price continue to remain attractive as the stock trades at PER of 6x FY12E, 1x P/BV, and offers attractive dividend yield of 3.4%," says Emkay Global Financial Services research report.

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To read the full report click on the attachment