Sharekhan's reserach report on SkipperFor Q2FY2016, though reported earnings of Skipper looks flattish, the adjusted earnings jumped sharply from Rs6 crore in Q2FY2015 to Rs17.6 crore in Q2FY2016. The reported earnings include extra-ordinary income from forward contract on both the comparable quarters; hence, one should look at the adjusted earnings. The strong earnings growth was mainly driven by a very healthy revenue growth of 18% YoY, as polyvinyl chloride (PVC) business witnessed a substantial growth (new capacity added recently) apart from a healthy growth in engineering products revenue. Consequently, the operating profit grew by 23% YoY to Rs37 crore. Further, owing to a hefty rise in other income, the bottom line improved substantially in Q2FY2016.The management maintained its strong revenue growth guidance of around 20-25% for FY2016E and FY2017E in view of a strong order backlog of Rs2,200 crore, widening its T&D opportunities in India and substantial capacity augmentation in the PVC pipe business with a sustained margin. We believe, on the back of improved capacity and wider geographical presence, PVC business would continue to grow substantially. Moreover, the improvement in credit rating will help the company to reduce effective cost of debt and benefit the bottom line. We have kept our earnings estimate unchanged with a Buy rating on the stock and retained our price target of Rs210. For all recommendations, 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.
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