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Buy Star Ferro; target of Rs 132: Edelweiss

Edelweiss is bullish on Star Ferro has recommended buy rating on the stock with a target price of Rs 132 in its research report dated May 05, 2016.

May 06, 2016 / 04:05 PM IST
 
 
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Edelweiss's research report on Star FerroStar Ferro & Cement Ltd. (SFCL) reported topline of INR 561.6 crs for Q4FY16, which was up 11% YoY on the back of 10% volume growth. However, the realizations for the company grew only 1% YoY to INR 6318/tonne, on the back of weak pricing environment in the East. Operating margins declined by 803 bps to 22.5% YoY on the back of subdued realization and higher freight costs. PAT came in at INR 39.8 crs v/s INR 54.9 crs for Q4FY15, a decline of 28% YoY. We believe the cement demand in NE will grow faster than other regions, driven by the Government’s increased thrust on bringing infrastructure in this region on par with the rest of India. With SFCL’s leadership position in this niche market, focus on brand building and recent capacity expansion, we believe the company is in a sweet spot to capitalize on the incremental demand. We raise our EBITDA estimates 3.2%/11.9% for FY17E/FY18E respectively. We continue to maintain our “BUY” recommendation on the stock with a target price of INR 132/share (6x FY18E EV/EBITDA). We raise our EBITDA estimates 3.2%/11.9% for FY17E/FY18E respectively. We continue to maintain our “BUY” recommendation as the stock is trading at attractive valuation of 5.4x FY18E EV/EBITDA and an EV/tonne of USD 102/tonne. We value the company at 6x FY18E EV/EBITDA with a target price of INR 132/share. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

first published: May 6, 2016 04:05 pm

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