February 13, 2017 / 14:11 IST
Star Ferro & Cement (SFCL) reported a weak set of Q3FY17 numbers. However, they were above our estimates at the EBITDA and PAT level. SFCL’s revenues declined 8.2% YoY to Rs 393.5 crore (vs. Idirect estimate of Rs 397.7 crore) led by 5.7% YoY decline in realisation to Rs 5,998 (vs. I-direct estimate of Rs 6,327) and 2.7% YoY fall in volumes to 0.66 MT (vs. I-direct estimate of 0.63 MT.
Outlook
However, consistent pressure on margins (due to higher operating cost and falling realisation), uncertainty on continuation of subsidy benefits beyond FY18 and equity dilution remains key near term concerns. Hence, we maintain our HOLD recommendation with a revised target price of Rs 105/share (considering the equity dilution adjusted EV/EBITDA and EV/t works out to be 7x and $190/t, respectively).
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