1.2% yoy to `869cr as against `858cr in the same quarter of the previous year. On the operational front, the EBITDA grew 49.5% yoy to `30cr on the back of 395bp yoy decline in raw material cost as a percentage of sales; the EBITDA margin improved by 111bp yoy to 3.4%. The other income for the quarter rose by 68.6% yoy to `35cr and as a result, the net profit jumped by 130.7% yoy to `43cr.
Improvement in macro scenario to support growth
The company’s Electro Mechanical Projects and Packaged Air-conditioning Systems (EMPPAC) division, which contributes ~57% to total revenues, will benefit from an expected revival in the economy as the division caters mainly to institutional/commercial clients. With the formation of a stable government at the centre, we expect the investment climate to improve, going forward. Additionally, we also expect the Cooling Products division to gain traction, given a favorable macro scenario.
Outlook and valuation
We expect Blue Star to report a CAGR of 10% in its revenue over FY2014-16E to `3,542cr. The EBITDA margin is expected to expand by 248bp over FY2014-16E to 5.6% due to better margin orders. Consequently, the net profit is expected to be at `122cr in FY2016 as compared to `74cr in FY2014. At the current market price, the stock is trading at EV/sales of 0.8x for FY2016E, which we believe is attractive, considering its historical average of 1.0x (five-year average). We maintain our Buy rating on the stock with a revised target price of `367 based on a target EV/sales of 1.0x for FY2016E.
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