Motilal Oswal's research report onS H Kelkar and Co.
SHKs consolidated revenue de-grew 7% YoY to INR 2,475m (est: INR 2,844m). Fragrance business de-grew by 15% YoY while Flavor business grew by 118% YoY for 4QFY17. EBITDA margins declined by 130bp to 14.9% mainly due to negative operating leverage despite gross margins improving by 60bp. EBITDA de-grew by 14% to INR370m on YoY basis.
OutlookWe believe that slowdown in fragrance business is temporary and remain confident about its structural growth. In view of some impact continuing in 1HFY18, we cut our earnings estimates by 5%/6% for FY18/FY19 and expect SHK to post revenue and PAT CAGR of 18% and 30% over FY17-19E. We maintain Buy with a target price of INR 367 (30x FY19E EPS).
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