Accumulate Ballarpur Industries; target of Rs 27: Emkay
Emkay Global Financial Services is bullish on Ballarpur Industries (BILT) and has recommended accumulate rating on the stock with a target price of Rs 27 in its September 3, 2012 research report.
September 05, 2012 / 12:22 IST
Emkay Global Financial Services is bullish on Ballarpur Industries (BILT) and has recommended accumulate rating on the stock with a target price of Rs 27 in its September 3, 2012 research report.
“BILT’s Q4FY12 consol revenues increased by 5% yoy to Rs 12.5 bn in line with est. Paper segment revenues stood at Rs 9.6 bn,5% yoy in line with est driven by increase in volumes. BILT reported paper sales volumes of 215,400mt, 4% yoy while paper realizations increased by 1% yoy to Rs 44,500/mt. Though RGP (Rayon Grade Pulp) revenues declined by 27% yoy to Rs 1.2 bn due to lower pulp prices yoy however they were in line with est. For FY12, BILT reported consol revenues of Rs 48.2bn, 7% yoy. BILT reported consol EBITDA of Rs 2bn, -17% yoy in line with est. EBITDA margins stood at 16.4% against est of 17.1%. Though consol PBT at Rs 452mn, -49% yoy was in line however PAT at Rs379mn, -62% yoy was above est due to negligible taxes. For FY12, BILT reported consol EBITDA of Rs 8bn, -11% yoy while APAT stood at Rs 1.1bn, -56% yoy.”“Paper industry has been struggling over the last 1.5-2 years due to increased cost pressures driven by higher power and fuel cost. Further, excess supply in the market due to recent capacity additions had reduced the pricing power of the players. However, we believe scenario is likely to change given that no new capacity additions are likely to come up in near term while paper demand continues to grow at ~8%. Going forward, we believe industry is likely to show margin improvement since costs pressures have peaked out & pricing power is gradually coming back to the industry. BILT has increased pulp capacity by 120,000 mt (at Sabah, Malaysia) in FY12 and will be increasing capacity by 170,000 mt in FY13. The new pulp mill at Sabah is in ramp up phase and we expect margins to improve in subsequent quarters.”“We have revised our estimates to Rs 2.7 (previous Rs 5.0) to reflect the recent restructuring of the company, slow ramp-up of expansion projects & continued margin pressure. We have also introduced FY14 earnings at Rs 4.0. Maintain accumulate with revised target price of Rs 27 (previous Rs 35) based on 40% discount to BV,” says Emkay Global Financial Services research report.Shares held by Mutual Funds/UTI Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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