Buy Piramal Glass; target of Rs 155: Emkay

Emkay Global Financial Services is bullish on Piramal Glass and has recommended buy rating on the stock with a target of Rs 155 in its May 8, 2012 research report.

“Piramal Glass, after adjusting for M-T-M forex losses of about Rs 133mn (60% of total forex loss in Q4FY12), PGL results were in line with our expectations on all counts. PGL reported revenue growth of 22.8% yoy to Rs 4.0bn led by strong growth of 31% in SF&B segment and 21% yoy growth in C&P segment. Pharma segment also witnessed growth of 11% yoy during the quarter. Core EBIDTA grew 6.3% yoy to Rs 849mn with EBIDTA margins contracting by 320bps yoy to 21%, being lower than expectations. Fall in EBIDTA margins was due to high raw material and energy cost. APAT grew 17.3% yoy to Rs 384mn largely due to restating in interest cost. For FY12, revenues grew 13.5% to Rs 14.0bn, while EBIDTA rose 9.3% to Rs 3.3bn and APAT rose 3% yoy to Rs 959mn.”
“C&P segment grew 21% yoy to Rs 2.0bn, largely led by robust growth in the premium C&P segment, which grew by 44% yoy and contributed to 54% of revenues in Q4FY12. Strong traction in Europe and USA along with market share gains led to healthy growth in premium C&P. On the flipside, growth in the mass C&P segment was subdued at 2% yoy. The premium segment would continue to be the key growth driver for C&P segment, while the new Greenfield facility would support growth in mass C&P segment. This quarter saw SF&B segment outpacing C&P segment on growth terms, with SF&B segment posting 31% yoy growth to Rs 1.1bn, largely led by robust growth in domestic markets of USA and Sri Lanka. However, on the cost side, Sri Lanka operation was impacted by high energy prices. Contribution of SF&B to revenues improved to 27% in Q4FY12. For FY12, the contribution of SF&B to revenues stood at 25%. Forecasting strong growth in SF&B market, PGL is investing about Rs 200mn in upgrading its SF&B line and shifting the decoration facility near the furnace, to propel revenue growth in SF&B segment.”
“Barring forex loss of Rs 133mn on account of M-T-M losses, PGL numbers were in line with expectations. Revenue growth was healthy led by SF&B segment and Premium C&P segment, but rising input cost and energy prices impacted EBIDTA margins. New facility has commenced operations and is expected to contribute 7-8% revenues from FY13E, but sub-optimal product mix, stabilization time would stem EBIDTA margins in FY13E. We believe Premium C&P and SF&B segment would continue to be the key growth drivers for PGL and would help achieve its guided 20-21% revenue CAGR for FY11-FY13E period. We maintain our BUY rating on PGL with target price of Rs 155/Share, which translates into 4.7x FY14E EV/EBIDTA,” says Emkay Global Financial Services research report.  Public holding more than 90% in Indian cos 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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