Buy Shankara Building Products; target of Rs 2017: Kotak Securities

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Kotak Securities' research report on Shankara Building Products

Shankara Building Products Ltd revenues were much ahead of our estimates but margins came lower than expectations due to sharp decline in enterprise and channel segment margins. Company is looking at higher revenue trajectory and in this process, margins may get impacted to some extent in the interim. However, more clarity would emerge in coming 1-2 quarters on the trade-off between higher revenues and slightly lower than expected margins. Though Q1FY19 was a strong quarter, company has mentioned that growth in Q2FY19 may get impacted by seasonal slowdown.

Outlook

We maintain our estimates and price target of Rs 2017 based on 23x EV/EBITDA for retail business and 8x EV/EBITDA for channel and enterprise business. Maintain BUY.

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