Moneycontrol PRO
Upcoming Webinar:Watch a panel of experts discuss: Challenges of continuously evolving regulation for Cryptocurrency, on 7th July at 3pm. Register Now

Buy S Chand and Company; target of Rs 156: Prabhudas Lilladher

Prabhudas Lilladher is bullish on S Chand and Company has recommended buy rating on the stock with a target price of Rs 156 in its research report dated May 25, 2022.

May 30, 2022 / 06:35 PM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

Prabhudas Lilladher's research report on S Chand and Company


S Chand reported a decent performance with PAT margin of 36.7% (PLe of 35.5%) on the back of strong tailwinds from school re-openings coupled with a price hike of ~5-10% taken across product portfolio. Management commentary for FY23E is bullish with a top-line guidance of Rs6,000mn+ complemented by a price hike of 12-15%. However, given persistent RM cost inflation GM can be under pressure prompting us to cut our EPS estimates by 37%/12% for FY23E/FY24E as we re-align our COGS assumptions. Subsequent to turning PAT positive after a gap of 3 years, we believe S Chand’s turnaround is complete and the company is back on growth track. We expect sales/PAT CAGR of 18%/121% over FY22-24E amid favorable base and maintain BUY on the stock with a TP of Rs156. S Chand trades at 11x/6x our FY23E/FY24E EPS estimates and we believe valuations are attractive given 1) strong growth guidance 2) strengthening BS (net debt of Rs721mn in FY22 with an intention to be net debt free by 4QFY23) and 3) improved NWC metrics (cash conversion cycle has improved from 318 days in FY19 to 226 days in FY22).



Outlook


We increase our target P/E multiple to 9.5x (8.5x earlier) to partially account for optionality arising from nearing NEP implementation timeline and improvement in BS and NWC metrics. Reiterate BUY. Near term pressure on GM is a key risk to our call.

Close

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Broker Research
first published: May 30, 2022 06:35 pm
Sections
ISO 27001 - BSI Assurance Mark