Buy Huhtamaki India; target of Rs 360: ICICI Direct
ICICI Direct is bullish on Huhtamaki India recommended buy rating on the stock with a target price of Rs 360 in its research report dated March 03, 2021.
March 04, 2021 / 02:11 PM IST
ICICI Direct's research report on Huhtamaki India
Huhtamaki India’s (HIL) Q4CY20 performance was hit by pandemic led disruptions like unavailability of containers (hit export business), logistic issues and lower volume offtake of economic packaging products. Also, labelling business took a hit in Q4CY20 due to limited outdoor activities. Further, despite significant competition in the flexible packaging business HIL has refrained from taking any price cut and kept its focus on maintaining gross margins. While gross margin was up ~82 bps YoY supported by better mix, lower operating leverage dragged overall EBITDA margin down by ~356 bps YoY to 6.4%. We continue to like Huhtamaki for its innovative packaging solutions providing capacity (backed by strong R&D of parent), strong clientele base and comfortable balance sheet position (D/E at 0.3x).
We revise our revenue, earnings estimates downward by ~9%, 18%, respectively, considering the current quarter performance. We value the stock at Rs 360 i.e. 19x P/E on CY21E-22E average EPS of ~Rs 19 (earlier target price Rs 375). We maintain our BUY recommendation on the stock.
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