Buy Emmbi Industries; target of Rs 161: KR Choksey

KR Choksey's research report on Emmbi Industries

In Q2FY17, Emmbi Industries Ltd (EIL) reported net sales of INR 569 Mn which increased by 8.7% YoY and 6.4% QoQ basis but was lower than our expectation of INR 604 Mn. EBIDTA stood at INR 73 Mn EBIDTA grew by 20.9% YoY and 5.6% on QoQ basis, and were in-line with our estimates of INR 71 Mn. In Q2FY17, Company reported EBIDTA margins of 11.8% beating our estimate by 115bps respectively. Company’s PAT stood at INR 33 Mn which increased by 51.9% on YoY and 13.7% on QoQ basis for Q2FY17 respectively.

Emmbi is the only company which is present across all the four growing segment. It is the first company to introduce flexible water tanks (patent registered), which has been gaining huge success in the domestic market, particularly in Maharashtra. With better capacity utilization, improving working capital, and growing segment will help Emmbi to deliver secular growth across domestic and export segment with its diversify product mix. We continue to remain positive on EIL on back of healthy growth and management’s commitment to remain market leader on various product-lines. At CMP of INR 115, We rate company’s common stock a “BUY” rating company is currently trading at 18.1x FY17 EPS of INR 6.5, 11.7x on FY18 EPS of INR 10.1 and 9.3x on FY19 EPS of INR 11.5. We value the company on at 14x FY19E EPS of INR 11.5 with a target price of INR 161 respectively which gives an upside of 40%.