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A n d t h e d i l u t i o n c o n t i n u e s …
Alok Industries’ (Alok) Q4FY12 numbers were broadly in line with our
estimates with operating margins beating our estimates by over 200 bps.
Alok reported one of the slowest growth in sales in over four years on the
back of lower domestic sales. While exports grew 40.3% YoY (on the
back of rupee depreciation) to | 814.9 crore, domestic sales grew only
10.3% YoY to | 1,780.5 crore. Going forward, we expect the company’s
revenues to grow at a lower pace as compared to the last four years as
the company has not planned any major capacity addition and also due to
the impact of a higher base. While we expect revenues to grow at a CAGR
of 22.8% during FY12-14E, PAT is expected to increase at a CAGR of
39.3% on the back of savings in interest costs. Considering the delay in
land monetisation and the ongoing dilution, we have downgraded Alok
from BUY to HOLD.
Real estate monetisation: A small beginning
Alok has closed two deals (a) eight floors out of 20 floors of Peninsula
Business Park, Lower Parel have been sold and the token consideration
for the same has been received and (b) three floors out of eight in
Ashford Centre, Lower Parel have been leased and the earnest money
deposits have also been received.
Dilution dilemma
The Board has approved a preferential allotment of up to 2.75 crore
equity shares and up to five crore warrants to promoters/promoter group
company. In the past also, the promoters have diluted their stake to fund
the capex requirements. While the CAGR in revenues and equity during
FY07-12E has been ~45%, profits have only grown at a CAGR of 17.6%
due to the burgeoning debt, which led to higher interest outgo.
V a l u a t i o n
The stock is likely to witness a multiple re-rating when the company
reduces its debt through land monetisation and, thereby, saves on
interest expenses. We have valued the stock at | 21 (based on an average
arrived at by assigning a multiple of 0.4x FY14E book value and 2.5x
FY14E EPS). Considering the ongoing equity dilution and high debt levels,
we remain cautious on Alok. Therefore, we have, downgraded Alok
Industries from BUY to HOLD with a revised target price of | 21.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A n d t h e d i l u t i o n c o n t i n u e s …
Alok Industries’ (Alok) Q4FY12 numbers were broadly in line with our
estimates with operating margins beating our estimates by over 200 bps.
Alok reported one of the slowest growth in sales in over four years on the
back of lower domestic sales. While exports grew 40.3% YoY (on the
back of rupee depreciation) to | 814.9 crore, domestic sales grew only
10.3% YoY to | 1,780.5 crore. Going forward, we expect the company’s
revenues to grow at a lower pace as compared to the last four years as
the company has not planned any major capacity addition and also due to
the impact of a higher base. While we expect revenues to grow at a CAGR
of 22.8% during FY12-14E, PAT is expected to increase at a CAGR of
39.3% on the back of savings in interest costs. Considering the delay in
land monetisation and the ongoing dilution, we have downgraded Alok
from BUY to HOLD.
Real estate monetisation: A small beginning
Alok has closed two deals (a) eight floors out of 20 floors of Peninsula
Business Park, Lower Parel have been sold and the token consideration
for the same has been received and (b) three floors out of eight in
Ashford Centre, Lower Parel have been leased and the earnest money
deposits have also been received.
Dilution dilemma
The Board has approved a preferential allotment of up to 2.75 crore
equity shares and up to five crore warrants to promoters/promoter group
company. In the past also, the promoters have diluted their stake to fund
the capex requirements. While the CAGR in revenues and equity during
FY07-12E has been ~45%, profits have only grown at a CAGR of 17.6%
due to the burgeoning debt, which led to higher interest outgo.
V a l u a t i o n
The stock is likely to witness a multiple re-rating when the company
reduces its debt through land monetisation and, thereby, saves on
interest expenses. We have valued the stock at | 21 (based on an average
arrived at by assigning a multiple of 0.4x FY14E book value and 2.5x
FY14E EPS). Considering the ongoing equity dilution and high debt levels,
we remain cautious on Alok. Therefore, we have, downgraded Alok
Industries from BUY to HOLD with a revised target price of | 21.
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