Nalanda Securities is bullish on Prataap Snacks has recommended buy rating on the stock with a target price of Rs 1462 in its research report dated November 05, 2018.
Nalanda Securities' research report on Prataap Snacks
Prataap Snacks (PSL) reported a revenue of INR 287cr which was higher by 8.9% and 6.9% QoQ. The continued growth was on the back of deeper market penetration across the country and higher sales from new product segments. With the company witnessing price increases in key raw materials, EBITDA fell 21% YoY but rose by 12% QoQ to INR 21cr (est. of INR 22cr). EBITDA margin stood at 7.2% (meets estimates) vs 9.9% in Q2FY18 and 6.7% in Q1FY19. Through cost optimization initiatives like reducing packaging dimensions, the company has partially offset the input price hikes. PAT for the quarter stood at INR 11.3cr (est. of INR 10.8cr), down by 13% YoY and up by 8% QoQ. PAT margins stood at 3.9% (vs est. of 3.6%) vs 4.3% in Q1FY18 and 3.7% in Q4FY18.
However, we believe the Avadh acquisition was slightly overvalued at 1.33 EV/sales (high competitive intensity in Gujarat with low market share for Avadh) and reduce our TP to INR 1462, giving an upside of 39%. (i.e valuing the stock at an average of prices derived by using EV/EBITDA multiple of 25x and DCF methodology).
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