The brokerage expects healthy topline growth to be driven by capacity expansion, faster growth in retail sales and installation of more burners.
Jiya Eco Products shares gained more than 2 percent intraday on April 23 after Khambatta Securities initiated coverage with buy call on the stock.
The brokerage expects healthy topline growth to be driven by capacity expansion, faster growth in retail sales and installation of more burners. Easy raw material availability and operating leverage will enable expansion of EBITDA margins, it said.
At current levels, Jiya Eco Products stock looks attractively priced at 5.6x FY21E EPS, the brokerage said, adding sum-of-the-part (SOTP) valuation generates a price target of Rs 109 with a potential upside of 90 percent and informing a buy rating.
The stock was quoting at Rs 58.30, up Rs 0.65, or 1.13 percent on the BSE, at 1322 hours IST.
Gujarat-based Jiya Eco Products (JEPL) manufactures bio-briquettes, bio pellets and processed agro waste. Biomass pellets and briquettes are made from agricultural, forest and other bio-wastes.
With abundant availability of waste, biomass presents a sustainable economic opportunity across the value chain, the brokerage said, adding demand for biomass fuel will increase going forward, driven by its lower cost, high energy content, concern for the environment, and emerging opportunities such as biomass co-firing at thermal power plants.
According to Khambatta, JEPL's greenfield project in Gandhidham with a capacity of 1,80,000 MTPA is expected to come on stream in Q1FY20.
"The new capacity will primarily target higher margin retail market, leading to margin accretive growth. A greater share of retail sales will also ease up working capital requirement," it said.
It further said the addition of processed agro waste to the product portfolio has opened up a new revenue stream. "Further, the company’s plan to install more burners at customer sites will create a secure captive revenue stream. While JEPL currently sells only within India, global opportunities and proximity of plants to major ports present future scope for exports."Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.