ICICI Direct is bullish on Butterfly Gandhimathi and has recommended buy rating on the stock with a target of Rs 240 in its November 18, 2015 research report.
ICICI Direct‘s research report on Butterfly Gandhimathi
Butterfly Gandhimathi Appliances’ (BGAL) Q2FY16 revenues grew 101% YoY to Rs. 311.5 crore on the back of strong Tamil Nadu Civil Supplies order execution (Rs. 150.3 crore) in Q2FY16. The EBITDA margin improved 60 bps YoY to 6.7%, driven by lower employee cost & other expenses as a percentage of sales while EBITDA grew 86.4% YoY. PAT increased to Rs. 6.56 crore vs.Rs. 1.48 crore YoY, mainly driven by higher revenue growth and lower interest cost
Outlook and Valuation
BGAL is trading at a discount to its peers (TTK Prestige, Hawkins Cookers). We believe it is a re-rating candidate considering the strong turnaround that it has made and also the growth potential it has. We expect the FY16 performance to improve significantly driven by government orders and better margins We remain positive about the long-term prospects of the company and maintain BUY recommendation on Butterfly Gandhimathi with a revised target price of Rs. 240 (based on 14.0x FY17E EPS of Rs. 16.9). However, on a cautionary note, though the upside seems lucrative, still considering the various impediments faced by small cap stocks, we believe this should be looked at as a medium to long term investment, which has inherent risks on account of higher price volatility.
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