Skipper
has delivered a
strong performance in 1QFY18 as well with its net revenue growing by
39.6% YoY to Rs4.32bn led by healthy performance in Engineering Products
and Infra Projects segments. Reported revenue includes sale of surplus
inventory worth Rs500-550mn carried forward from 4QFY17, in absence of
which revenue would have grown by 24% YoY. Looking ahead, we continue to
believe that a sizeable order book, huge imminent opportunities and
diversification into PVC business firmly place Skipper on higher growth
trajectory. Notably, the stock has witnessed a sharp rally since our
initiation report with BUY
recommendation in Feb’17. Remaining positive on Skipper’s
fundamentals, we reiterate our BUY recommendation on the stock with an
upwardly revised Target Price of Rs254 (from Rs187 earlier).
Strong Engineering Volumes Lift Net Sales
Strong
volume in Engineering Products segment led to revenue
growth, while glitches relating to GST roll-out restricted revenue
growth in Polymer segment. Revenue from Transmission business – which
contributes 84% of Skipper’s overall sales – surged by 42.6% to
Rs3.36bn. PVC business grew by just 1.9% YoY to Rs384mn, while revenue
from Infra Projects business zoomed by 124.4% YoY on low base and faster
completion of key projects.
EBITDA Margin at 11.9%; PAT up 51.7% YoY
Led
by healthy execution, Skipper’s EBITDA and PAT surged 31.2% YoY and
51.7% YoY to Rs516mn and Rs160mn, respectively. Its overall EBITDA
margin declined by 80bps YoY to 11.9% owing to higher commodity prices.
Margin in Engineering Products, Polymer and Infra Projects segments
declined by 100bps YoY, 100bps YoY and 130bps YoY to 13.4%, 9.3% and
12.5%, respectively.
Foray into Solar Structure Biz
The
solar structures – ground-based module mounting, roof top mounting,
module mounting accessories and seasonal tilt – will be manufactured at
existing Uluberia plant. As per the Management, the required automated
machineries have already been installed at the plant.
Outstanding Order Book at Rs26.4bn
The
Company has secured new orders worth Rs3.57bn during Q1FY18 for
transmission tower supply from PGCIL, Transmission Corporation of
Telangana, UP Power Transmission Corporation and other clients. Its
outstanding order book stands at Rs26.4bn, which is 1.5x of FY17
revenue.
Outlook & Valuation
Looking
ahead, we expect Skipper’s sales and PAT to witness 15.0% and 24.6%
CAGR, respectively over FY17-FY19E, while RoCE is seen at 22.4% by
FY19E. Given higher revenue visibility and huge imminent opportunities,
we increase our target multiple to 15x FY19 earnings from 12x earlier. We reiterate our BUY recommendation on the stock with an upwardly revised Target Price of
Rs254.
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