Prabhudas Lilladher's research report on S Chand and Company
While S Chand’s results were below our estimates, BS & NWC metrics witnessed noteworthy improvement. In FY21, NWC declined to 294 days (321 days in FY20) while net debt reduced to Rs1.2bn (Rs1.8bn in FY20). After reporting losses in FY19 & FY20, break-even was finally achieved in FY21 (minor loss of Rs65mn) backed by successful implementation of S Chand 3.0 plan that focused on cost rationalization & improvement in working capital. As far as the outlook is concerned, management envisages to scale Rs5bn in top-line in FY22E aided by price hike of 5-10%. Consequently, we have realigned our FY22E estimates (earnings cut appears substantial as business lost in 4QFY21 due to 2nd wave may not be fully recouped in subsequent period).
We maintain BUY on the company with a revised TP of Rs146 (Rs127 earlier) as we increase our target multiple to 8.5x (6.5x earlier; but still at a ~15% discount to Navneet) given successful implementation of S Chand 3.0 plan (turnaround is complete).
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