For Q4FY08, the company reported a 32% y-o-y jump in net sales to Rs8216 million. EBITDA increased by 46%, while EBITDA margins improved by 92 bps to 9.6%.
Adjusted PAT increased by 24%, lower than the operating profit growth, due to higher interest cost and losses from JV’s to the tune of Rs113 million. However, the company had made a profit of Rs62 million from JV’s in the corresponding quarter of the previous year.
We have revised downwards our earnings estimates for FY09E and FY10E by 12% and 20% respectively.
EBITDA estimates have also been revised downwards for FY09E and FY10E respectively by 50bps to factor in the risk of higher raw material cost. Our main concern is that the company may partly have to absorb the sharp increase in the raw material prices that we have seen which could affect its margins going forward.
At the CMP of Rs 223, the stock trades at a P/E of 15.9x FY09E diluted earnings. After adjusting for the value of GIPL (Rs146), Associated Transrail (Rs39), and Sadbhav Engineering (Rs9), the stock trades at 2.1x FY09E diluted earnings.
We are downgrading our one-year forward target price to Rs415 from Rs630 mainly due to a downgrade in our earnings estimates but maintain ACCUMULATE rating.