CRISIL revises Rainbow Papers` fair value to Rs 82
CRISIL Research has come out with its report on Rainbow Papers. The research firm has revised company's fair value to Rs 82 per share however at the current market price of Rs 76, maintained the valuation grade of 3/5 and the fundamental grade of 3/5 to the company.
June 26, 2013 / 16:01 IST
CRISIL Research's report on Rainbow Papers
Rainbow Papers' (Rainbow's) Q4FY13 results were broadly in line with CRISIL Research's expectations. Revenues decreased marginally by 2.6 percent q-o-q to Rs 2,276 mn. With the new plant being commissioned in Q3FY13, the company will gradually phase out the trading business and shift to the sale of self-manufactured goods. EBITDA margin increased q-o-q to 17.6 percent from 12.5 percent in Q3FY13 as the company had one-time expenses on commissioning of a new line. However, PAT dropped 32.6 percent q-o-q due to increase in capital cost and higher tax rate. We maintain the fundamental grade of 3/5.Ramp-up from newly commissioned PM-8 slow Paper production volume increased marginally by 1.6 percent during the quarter. The utilisation level for the newly commissioned plant (PM-8) is still low at 18-20 percent. According to the management, the ramping-up is slow due to delay in commissioning of the power plant. With the commissioning in Q1FY14, the utilisation level is expected to improve to 60-65 percent over the next three-four months. The company is mainly targeting to produce high-margin W&P and newsprint from PM-8. We estimate 74 percent utilisation in FY14 and 84 percent in FY15. As the company has already developed sales channels through trading, starting from Q3FY12, we don't expect any challenges in selling the incremental production.Realisation dropped; margin normalised
Paper realisation dropped during the quarter in line with a drop in input prices. Average realisation for manufactured paper was lower by 3-4 percent. However, margin for the manufactured goods was maintained at ~21 percent. Overall, margins improved q-o-q as the other expenses largely incurred on commissioning of the new line in Q3FY13 were not incurred in this quarter. Tax rate jumped due to recognition of deferred tax liability, not recognised in the earlier three quarters. In FY13, debtor days increased to 83 from 53 in the previous year due to execution of large government tender wherein the amount is payable after completion of the entire delivery. Going forward, debtors days are expected to get back to 52-54 days.Power plant commissioned in Q1FY14
The company has commissioned the 20 MW power plant, which will cater to the energy requirement of PM-8 as well as the additional 161,700 tpa capacity (132,000 folding duplex board plant and 29,700 mill modernisation project) expected to come up by FY16. Rainbow is expected to fund the additional capex of Rs 6,300 mn through debt of Rs 3,800 mn, equity infusion of Rs 730 mn from the promoter and the rest through internal accruals.Fair value revised
We have moderated our earnings estimates. We have revised our fair value to Rs 82 per share. At the current market price of Rs 76, our valuation grade is 3/5. Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report. The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"
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