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Buy Zuari Agrochemicals; target of Rs 579: Edelweiss

Edelweiss is bullish on Zuari Agrochemicals has recommended buy rating on the stock with a target price of Rs 579 in its research report dated May 28, 2018.

September 18, 2018 / 17:15 IST
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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.

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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’.