CMI Ltd’s Q1FY18 consolidated revenue was broadly in line with CRISIL Research’s expectations. Revenue grew 70.7% y-o-y to Rs. 1,315 mn (down 3.1% q-o-q), primarily led by ramp-up of operations in the Baddi facility. Gross margin improved 394 bps y-o-y to 23% (down 314 bps q-o-q). Consequently, EBITDA margin expanded 265 bps y-o-y to 13.4% (down 271 bps q-o-q) despite a 97% y-o-y surge in overhead expenses (employee and other costs). EBITDA jumped 113% y-o-y to Rs. 176 mn (down 19.4% q-o-q), driving PAT growth of 300% y-o-y to Rs. 60 mn (down 74% q-o-q). We expect CMI to benefit from strong growth prospects in the cable industry, which should drive operating leverage at the Baddi facility (currently at 40% utilisation). Given the fragmented nature of the industry, working capital is a key monitorable. We reiterate the fundamental grade of 3/5.
We broadly maintain our earnings estimates for FY18 and FY19. Consequently, we maintain the discounted cash flow (DCF)-based fair value at Rs. 259 per share. At the current market price of Rs. 192 per share, our valuation grade is 5/5.
Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report. The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.CRISIL Limited. All Rights Reserved. Published under permission from CRISIL"Source:
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