ICICI Direct is bullish on Hikal has recommended buy rating on the stock with a target price of Rs 205 in its research report dated May 10, 2019.
ICICI Direct's research report on Hikal
Q4 revenues grew 17.2% YoY to Rs 457.5 crore (I-direct estimate: Rs 450.3 crore) on account of 20.7% YoY growth in the pharma segment to Rs 259.2 crore (I-direct estimate: Rs 268.4 crore) and 12.8% YoY growth in the crop protection segment to Rs 198.4 crore (I-direct estimate: Rs 175.8 crore). EBITDA margins remained at ~18.4%, (I-direct estimate: 19.2%). The fall in gross margins (75.8% vs. 79.3% in Q4FY18) was offset by a decline in employee cost and other expenditure. EBITDA grew 17.5% YoY to Rs 84 crore vis-à-vis I-direct estimate of Rs 86.6 crore. Net profit grew 31.6% YoY to Rs 33.3 crore (I-direct estimate of Rs 34.2 crore) due to a strong operational performance and lower tax rate (30.8% against 35.3% in Q4FY18).
The company has spent ~Rs 500 crore over the last five years to augment capacities. After years of volatility in growth, Hikal has been witnessing a relatively stable growth trajectory. We arrive at a valuation of Rs 205 based on 15x FY21E EPS of Rs 13.7.
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