Hold Control Print; target of Rs 342: ICICI Direct

ICICI Direct's research report on Control Print

Control Print (CPL) reported a muted performance in Q2FY19 with Q2FY19 being the third consecutive quarter of no growth Net sales for the quarter came in at Rs 41.1 crore, down 1% YoY EBITDA in Q2FY19 was at Rs 8.9 crore with corresponding EBITDA margins at 21.7%, down 680 bps YoY. Margins came in substantially lower on account of a decline in share of consumables for the quarter vs. printer system. CPL earns high margins on consumables (>30%) with nearly nil to <10% margins on the printer system PAT in Q2FY19 was at Rs 6.4 crore, down 13.5% YoY. PAT for the quarter was supported by gains (Rs 0.7 crore) on investment book.

Outlook

Hence, we downgrade CPL to HOLD and value it at Rs 342 i.e. 14x P/E (1.1x PEG, earnings CAGR of 12.3% over FY18-20E) on FY20E EPS of Rs 24.4. Balance sheet positives like debt free status, nil incremental capex and RoCE>cost of capital remain at CPL.