Kotak Securities is bullish on Surya Roshni has recommended buy rating on the stock with a target price of Rs 328 in its research report dated January 14, 2019.
Kotak Securities' research report on Surya Roshni
We initiate coverage on Surya Roshni Ltd (SURL) with ‘BUY’ rating and a target price of Rs328 based on SOTP (Sum of the parts) valuation methodology. We believe that SURL valuations can get rerated on back of 1/ potential demerger of company’s consumer electrical and steel pipes business 2/ strong growth in company’s estimated consolidated profits through FY18-20E driven by a/ meaningful growth in fans & consumer appliance segments supported by improved penetration on the current lower base b/ stability in LED prices c/ recovery in the pipes business driven by improved public spending in infrastructure. We project c.18.7% CAGR between FY18-20 in consolidated profits from Rs.1.08 bn in FY18 to Rs 1.5 bn in FY20E, expect improved return ratios and balance sheet strengthening-building a case for stock re-rating.
At current price of Rs 242, SURL stock is trading attractive -at 5x EV/EBITDA and 8.6x P/E on FY20E earnings.
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