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Last Updated : Nov 21, 2016 02:05 PM IST | Source:

Hold Butterfly Gandhimathi; target of Rs 185: ICICI Direct

ICICI Direct recommended hold rating on Butterfly Gandhimathi with a target price of Rs 185 in its research report dated November 18, 2016.

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ICICI Direct's research report on Butterfly Gandhimathi

H1FY17 was disappointing for the company as branded sales de-grew 9% YoY to Rs 264.2 crore. Branded retail sales grew an impressive 31% YoY for Q2FY17 and 25% for H1FY17. However, growth of branded sales was largely impacted on account of a decline in branded institutional sales, which was due to lower new LPG connection released by oil companies. The management indicated this business is expected to pick-up in ensuing quarters on account of implementation of PM Ujjwal Yojana (PMUY). The government is aiming to provide LPG connections to over 5 crore households below the poverty line in the next three years under the PMUY scheme. This should provide a boost to the LPG gas stove market, going ahead.

After a strong revenue performance in FY16, FY17 revenues would show de-growth owing to absence of government orders as we have not factored any government orders post FY16. We have lowered our revenue and margin estimates for FY17E, FY18E considering slower-than expected growth in the branded segment. We have introduced FY19 estimates. The key parameter to watch out would be the company’s performance in the non south markets. Uptick in institutional sales and improvement in margins in a highly competitive market would be critical for a re-rating of the stock. We have a HOLD recommendation with a target price of Rs 185 on the stock (based on 14.0x FY19E EPS of Rs 13.2).

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First Published on Nov 21, 2016 02:05 pm
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