Hold Shankara Building Products; target of Rs 320: ICICI Direct

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ICICI Direct's research report on Shankara Building Products

Shankara Building Products’ (Shankara) H1FY21 has been about balance sheet repair and cost rationalisation amid the Covid-19 shock. For H1FY21, the topline de-grew 34% YoY to Rs 834 crore (decline of ~23% YoY for Q2, with a sharp sequential improvement) impacted by Covid-19. The EBITDA margin for H1FY21 declined 350 bps YoY to 1% (down 20 bps to 3.8% in Q2) mainly on account of negative operating leverage. Reported loss was at Rs 19 crore for H1 while PAT for Q2 was at Rs 6.3 crore, down 39% YoY.

Outlook

Hence, we maintain HOLD with a target price of Rs 320/share. We value its retail business at Rs 310/share (6x FY22E EV/EBIT).

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