Buy Shree Pushkar Chemicals; target of Rs 250: ICICI Direct

ICICI Direct's research report on Shree Pushkar Chemicals

Shree Pushkar Chemicals & Fertilisers Ltd (SPCL) reported muted Q4FY18 performance at the standalone level primarily driven by muted realisations and high raw material prices in the dye intermediates space. Net sales in Q4FY18 stood at Rs 102.0 crore. EBITDA in Q4FY18 came in at Rs 9.7 crore (down 32.0% YoY) with corresponding EBITDA margins at 9.5% (down 600 bps YoY).  PAT in Q4FY18 stood at Rs 6.3 crore, down 23.0% YoY partly aided by lower effective tax rate which came in at 19.0%.  On a consolidated basis, for full year FY18, net sales stood at Rs 395.3 crore, EBITDA at Rs 61.1 crore and PAT at Rs 36.5 crore (EPS: Rs12.1).

Outlook
We value SPCL at Rs 250, i.e. 16.0x P/E on FY19E & FY20 average EPS of Rs 15.5 and assign a BUY rating on the stock. We have factored in surge in dye intermediates prices in FY19E (for full year basis, 15% YoY) and expect the prices to normalised in FY20E as manufacturing facilities in China adapt to new environmental norms. We also drive comfort from preferential allotment to promoter group @ Rs211.6/share amounting to ~Rs11 crore in May 2018. For all recommendations report, click here

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