Sell Skipper; target of Rs 90: Dolat Capital

Dolat Capital's research report on Skipper

For Q2FY19, the revenue grew 1.6% YoY to ` 5,239.6mn, grew 9.5% QoQ from ` 4787mn. EBITDA declined 43.2% YoY to ` 388mn, declined ~13.7% QoQ from ` 449.7mn EBITDA margin declined 583bps YoY to 7.4%, declined from 9.4% QoQ. PAT declined 89.3% YoY to ` 24.9mn, declined 44.6% QoQ from ` 45mn. The margins declined due to high raw material cost impact of both steel & Zinc on the fixed price contracts primarily for Telecom orders. There was also initial undercutting in margins in Railway supplies to gain market share.

Outlook

This coupled with rising material cost leads us to lower our earnings estimates for FY19/FY20 by 22%/27%. We continue our Sell rating with TP ` 90 (P/E 10x FY20E).