The shares of Amrutanjan Health have been trading 17 percent up in Friday’s session. In fact the stock has gained 116 percent on YTD basis. SBI Cap Securities has initiated coverage on the stock with a 'buy' and a target price of Rs 300.
In an interview to CNBC-TV18, Sagarika Mukherjee, Senior Research Analyst at SBI Cap Securities, said the company is on a new growth trajectory, which will propel its earnings.
SBI Cap Securities expects an increase in the company’s distribution network on the back of aggressive marketing of new format products and sees the widening geographic spread a positive for Amrutanjan.
It expects the company to post sales (CAGR) at 16 percent, EBITDA of 17 percent and profit of 28 percent over FY14-16.
Below is the transcript of Sagarika Mukherjee’s interview with Ekta Batra & Reema Tendulkar on CNBC-TV18.Ekta: What is your earnings estimate for Amrutanjan Health Care and the reason why you have a target price of Rs 300 as well as a buy recommendation on the stock?A: Amrutanjan is primarily an intrinsic story. The company has got on to a strategy that for the next three-four years will propel the earnings growth at the topline by at least 16 percent odd and at the bottomline we are expecting the earnings to grow by 28 percent odd and the growth on the topline is primarily coming from venturing into faster growing categories like body pain, management segment or female hygiene products or the food beverages products are expected to add at least Rs 25 crore-30 crore going ahead in next couple of years and the growth will come at brand investments that we are expecting. Hence the margins will dip but eventually rise up because of high gross margins coming in from the other products. Therefore, we believe that overall the story is driven mostly by venturing into new products plus increase in distribution in modern retail outlets and also venturing out in other geographies apart from the south Indian geography that they are based out of.
Reema: Tell us what the balance sheet of Amrutanjan looks like. What is the cash or do they have high debt. How much comfort do you have on their balance sheet as of now and going ahead?A: This is a very low debt company and the cash and other things on the books are pretty healthy. The balance sheet looks healthy; the cash flows are also around Rs 10 crore-12 crore odd every year at the operating level. The only hit on this company can come from the working capital requirements which could be little aggressive because they might have to extend some credit to their dealers going ahead in order to expand the distribution. However, apart from there is nothing that will be heavily on cash flows, in terms of capex they do not need anything in the next two-three years in order to drive the growth ahead. Hence we feel that the EBITDA on ratios and all these things will look up given that the capital requirements going ahead will be low.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
