Kotak Securities is bullish on AksharChem (India) has recommended buy rating on the stock with a target price of Rs 800 in its research report dated September 20, 2017.
Kotak Securities' research report on AksharChem (India)
Akshar Chem Q1FY18 performance was in-line with estimates. Net sales during the quarter grew 14.6%/19.4% YoY/QoQ to Rs633 mn, driven by higher volume of CPC Green, which grew 28.8% YoY to 469MT. Vinyl Sulphone volume during the quarter stood at 1,688MT vs 1,659MT in 1QFY17. The growth in the revenue was restricted due to rupee appreciation, as the company derives ~75% of its revenue from the exports. However, EBITDA declined 16% YoY to Rs120 mn, with an EBITDA margin of 18.9%. PAT came in at Rs72 mn, down 20.4% YoY. As the company has undertaken aggressive capex plan, it provides long term earnings visibility. AksharChem raised Rs690.4bn through QIP in the month of August 2017 to fund the same. We expect the revenue contribution from pigment business to go up gradually from ~33% currently to 60%, on the back of higher production backed by expansion. Earnings growth should resume from FY19 onwards which could help improve valuations in future, as business transformation from cyclical to more stable earnings will change financial trajectory. Though, we continue to maintain our positive view on the stock, we have lowered our earnings estimate (on rising raw material costs) and target price factoring equity dilution. Our revised estimates now stands at Rs50.9 and Rs66.4 for FY18E and FY19E, respectively.
We recommend ACCUMULATE rating, with a revised target price of Rs800 (earlier Rs960).
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