Buy Innoventive Ind; target of Rs 170: Aditya Birla Money

Aditya Birla Money is bullish on Innoventive Industries (IIL) and has recommended buy rating on the stock with a target of Rs 170 in its November 2, 2012 research report.

“IIL’s standalone revenue grew 21.2% YoY and 32.4% QoQ to Rs1.8bn on account of (1) volume growth in CEW tubes and membrane strips and (2) higher realisations in CEW tubes • IIL’s standalone EBITDA for the quarter grew 40.7% YoY and 25.4% QoQ to Rs462.3mn on account of (1) volume growth in the high margin value-added products -- CEW tubes and membrane strips -- and (2) higher-than-expected margins in the CEW tubes segment. Standalone PAT grew 27.9% YoY and 56.2% QoQ to Rs189.9mn on account of growth in EBITDA and lower interest costs as debt of ~Rs500mn was repaid.”

“IIL acquired 51% stake in Innovative Technomics Pvt. Ltd (ITPL), an industry leader in high voltage soft starters and testing equipments catering to the domestic and international markets. ITPL’s range of engineering products comprises High Voltage Soft Starters, High Speed Testing Equipment and Linear Motor Systems used in industries such as water, oil & gas, steel, cement and textiles. The acquisition will enable IIL to broaden its product offering in the engineering space.”

“IIL’s cost competitiveness and ability to do high product customisation through product and process engineering makes it well placed to drive exports in CEW tubes and volume growth in membrane panel strips. Strong economic activity in the international oil & gas exploration industry and IIL’s increasing vendor certifications should lead to robust growth in IIL’s OCTG business. On account of higherthan- expected CEW tubes performance, we increase our realisations for CEW tubes. We lower our FY13E ERW tubes volume assumption by 10.1% to 26,700 tonnes. Consequently, we increase our EPS estimates for FY13E and FY14E by 6.6% and 5.3% to Rs16.4 and Rs20.1 respectively. With the revision of our earnings estimates upwards and quarterly rollover of our 1 year forward SOTP value of IIL, our 1 year target price increases by 8.4% to Rs170 per share. Our target price implies a potential upside of 32.1%. We maintain our buy rating on IIL,” says Aditya Birla Money research report.

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