Edelweiss's research report on Zuari Agrochemicals
Zuari Agrochemicals (ZAC) reported below expectation Q4FY18 performance impacted by higher raw material (RM) costs. Standalone EBITDA fell 21% YoY to INR610mn, similarly, EBITDA of Paradeep Phosphate (PPL – 40% joint venture) contracted ~50% to INR960mn. However, EBITDA of Mangalore Chemicals & Fertilizers (MCFL) nearly doubled.
Outlook
Given high financial leverage, despite the marginal cut in EBITDA, we cut FY20E PAT by 32%. Subsidy receipts and company’s ability to fund its ongoing capex remain key monitorables. We value the stock at 15x FY20E EPS and arrive at a revised TP of INR579 (INR847 earlier). Maintain ‘BUY’.
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