Hold Shankara Building Products; target of Rs 485: ICICI Direct

ICICI Direct's research report on Shankara Building Products

Shankara's topline de-grew 18.6% YoY to Rs 619.7 crore on account of sharp revenue de-growth in the channel & enterprise division. The EBITDA margin contracted 445 bps YoY to 2.7% mainly due to a sharp contraction in EBIT margins of the channel & enterprise division. Retail division EBIT margin was at 7.3% in Q4FY19 (10.8% in Q4FY18). PAT de-grew sharply by 92.5% YoY to Rs 1.6 crore due to sharp EBITDA margin contraction.

Outlook

Hence, we have a HOLD recommendation on the stock with a target price of Rs 485/share. We value its retail business at Rs 466/share (11x FY20E EV/EBIT).