East India Securities is bullish on I G Petrochemicals has recommended buy rating on the stock with a target price of Rs 199 in its research report dated June 28, 2020.
East India Securities' research report on I G Petrochemicals
4QFY20 Revenue of I G Petrochemicals Ltd (IGPL) de-grew by 14.2% YoY to Rs2685mn. This de-growth was due to decline in both volume and realization. Plant shutdown dAue to global pandemic impacted the volume. EBITDA margin witnessed a steep contraction of 570bps YoY to 6.0%. This was largely owing to increase in commodity prices that resulted in an increase in RM cost by about 375bps YoY to 79.9% of sales. Other expenses stood at 8.1% of sales, up ~60 bps YoY. The company reported one-offs of Rs55-60mn owing to inventory losses and COVID related provisions. Adjusting for one-offs, EBITDA margin stood at 8.0%. Overall, EBITDA reported a decline of 56.2% YoY to Rs160mn, owing to lower gross margins and operating deleverage. PAT reported decline of 78.1% YoY to Rs40mn with PAT margin of 1.5% which witnessed a contraction of 430bps.
Currently, the stock is trading at FY22E P/E of 7.5x. We value the stock on a forward P/E multiple of 10x and arrive at target price of Rs 199 per share which offers 34% upside from current valuations.
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