Buy Skipper; target of Rs 285:KRChoksey

KRChoksey's research report on SkipperSkipper Ltd. (“Skipper”) founded in 1981, is among India’s top three Power Transmission Tower manufacturing companies. The company is complete integrated player offering towers, fasteners, accessories as well as EPC solutions. It is also engaged in the production of poles-monopoles and PVC pipes, etc. Skipper is promoted by Kolkata based S K Bansal Group. We believe while Skipper is a strong play on domestic transmission capex and the company scaling up globally coupled with the anticipated robust PVC pipe revenues should form the major earnings triggers ahead.Post exiting the loss making steel pipe business in FY15, Skipper today has emerged as a strong manufacturer of transmission towers and PVC pipes player. We believe increased government investment plans, favorable regulatory policies, increased private sector participation should drive the scalability in company’s business ahead. Also, thanks to location advantage and integrated business model and renewed focus on profitability enrichment should translate into higher EBITDA margins in the range of 14-15% during FY16-18E from historical levels of 6 to 7% (past 4 years 9-11%). Moreover, this number stands ahead of peers. Robust order book providing revenue visibility in T&D business; multifold expansion in PVC business on a pan India level providing scalable growth opportunities reinforces our belief in sustainable superior earnings performance ahead (EPS CAGR FY16-18E - 46.12%). We initiate coverage with a BUY and TP of INR 285 based on 15x PE of FY18E EPS and on 8.55x EV/EBITDA FY18E basis, implying 61% upside from current levels. At CMP of INR 177, the company trades at P/E of 9.3x its FY18E EPS of INR 19.02. 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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