Buy Pennar Industries; target of Rs 31: Nirmal Bang

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26 Aug, 2025 12:21

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Nirmal Bang is bullish on Pennar Industries and has recommended buy rating on the stock with a target of Rs 31 in its February 12, 2013 research report.
 
“Pennar Industries has reported a moderate consolidated quarter due to lower demand in the auto, engineering, railways and infrastructure sectors for the steel products which includes steel strips and engineered profiles. We believe the scenario looks challenging in near term due to subdued performance by the heavy engineering segment and overall slower growth in the infrastructure in India though we draw comfort on the steady performance in PEBS. However, EV/EBITDA of 3.8x FY13E and 3.3x FY14E broadly factors the challenging scenario.”
 
“Net Sales was flat YoY to Rs. 266.4 crore and up by 2.5percent QoQ. The sales improved due to the growth in Tubes by 66percent YoY, Industrial Components by 30.8percent YoY and System Projects divisions by 17.4percent. The Consolidated EBITDA fell by 17.5percent YoY to Rs. 27.7 crore and was flattish QoQ basis. The EBIDTA margin fell by 210bps to 10.4percent in Q3FY13 as against 12.5percent in Q3FY12 and down by 30bps QoQ basis. This was primarily due to margin pressures in the Systems and Projects, Engineered Profiles and Cold Rolled Steel Strips businesses. The Adj PAT declined by 19.9percent YoY to Rs. 10.8 crore and down by 3.5percent QoQ. The PAT margin stood at 4.1percent in Q3FY13 as against 5percent in Q3FY12 and 4.3percent in Q2FY13. Decline in tax rate supported the steep fall in profitability of the company. Tax rate stood at 30.9percent in Q3FY13 as against 33percent in Q3FY12 though tax rate was low at 24.8percent in Q2FY13 as compared to Q3FY13. The fluctuation in tax rate is attributed to the tax benefit in PEBS for the period of five years which is valid till 2016.”
 
“At CMP of Rs. 25, Pennar is trading at a P/E of 6.6x FY13E and 5.8x FY14E. The EV/EBITDA is 3.8x FY13E and 3.3x FY14E. The company has been able to maintain the top-line during the quarter but the pressure on operating margin continues, which is a matter of concern.  We have introduced FY14E estimates where we expect net revenue to grow by 8.6percent to Rs. 1215.5 crore on account of benefit of capacity expansion in PEBS Gujarat from 60000MTPA to 90000MTPA and solar segment. We rollover our target multiple from FY13E to FY14E to a target of Rs. 31 per share (Rs. 29 per share), valued on an EV/EBITDA 4x FY14E and recommend BUY rating,” says Nirmal Bang research report.

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