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Buy Ester Industries; target of Rs 200: Khambatta Securities

Khambatta Securities is bullish on Ester Industries has recommended buy rating on the stock with a target price of Rs 200 in its research report dated May 26, 2022.

May 30, 2022 / 09:52 PM IST
The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

 
 
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Khambatta Securities' research report on Ester Industries


Ester reported robust growth in 4Q FY22 and FY22, driven by strong performances across segments. Operating revenues increased by 30.7% y-o-y and 41.7% over 4Q FY22 and FY22, respectively. EBITDA growth of 10.2% y-o-y and 4.2% in 4Q FY22 and FY22, respectively was lower than the topline growth with margins declining, as a fall in Film margins more than offset the higher margins in Speciality Polymers (SP) and Engineering Plastics (EP) segments. Film margins were lower due to higher raw material cost. PAT was broadly flat on a y-o-y basis during the quarter as well as the full financial year due to higher interest expenses and higher tax. The net proceeds from the divestment of the EP business are expected to be approximately Rs 225 crore.



Outlook


Consequently we increase our target multiple to 8.0x (from 7.0x) FY24E EPS to arrive at a price target of Rs 200, reiterating a BUY with an upside of 52%.

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first published: May 30, 2022 09:52 pm
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