Buy Emmbi Industries; target of Rs 96 KRChoksey

KRChoksey's research report on Emmbi Industries

Emmbi Industries’s Q1FY21 revenue from operations declined 24.1% YoY to INR 508 mn (-32.0% QoQ) due to decline in volume as well as realization owing to COVID-19. EBITDA declined 36.0% YoY (down 31.1% QoQ) to INR 59 mn while EBITDA margin contracted by 216bps YoY (+15bps QoQ) to 11.6%. Depreciation & finance cost stood at INR 17.5 mn/28.7 mn respectively for the quarter. Net Profit stood at INR 11 mn for the quarter; down 69.2% YoY (down 71.7% QoQ). Net Profit margin thus stood at 2.1% in Q1FY21 (vs 5.1%/5.0% in Q1FY20/Q4FY20), a contraction of 305bps YoY (-293bps QoQ).

Outlook

Expecting a recovery in upcoming quarters & fairly stable margins, we raise our P/E multiple to 8.0x (earlier 7.5x) on FY22E EPS of INR 12.0/share and maintain our target price of INR 96/share, an upside of 19.2% over the CMP. Accordingly, we reiterate a “BUY” rating on the shares of Emmbi Industries.