KAJARIACER BUY ( + ) Target Price Rs. 712 :: Kotak Sec,report

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KAJARIACER			1-15-2015
Recommendation BUY ( + )	Target Price Rs. 712

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Results overview: Revenues for Q3FY15 were in line with our estimates and
were led by improvement in volumes and realization. Operating margins
witnessed an improvement led by price hikes. Net profit performance was
thus boosted by improvement in revenues and margins. We continue to
remain positive on the company on account of expected increase in volumes
going forward. With continued focus of government on Swachch Bharat
Abhiyan and likely implementation of GST, we expect company to benefit in
terms of higher volumes going forward. We revise our volume estimates
upwards and value the company at 23x P/E with a revised price target of Rs
712 on FY16 estimates (Rs 648 earlier). We continue to maintain BUY
recommendation on the stock.

Net profit performance led by improvement in volumes and reduction
in interest expense
Consolidated net profit growth stood at 55% YoY for the quarter and was led by
improvement in volumes and realizations and decline in interest outgo. We revise
our volume estimates and expect net profits to grow at a CAGR of 40.8% between
FY14-16.
Valuation and recommendation
Stock is currently trading at attractive valuations of 30.5x and 20.4x P/E on FY15 and
FY16 estimates. We revise our volume estimates upwards and value the company at
23x P/E with a revised price target of Rs 712 on FY16 estimates (Rs 648 earlier). We
continue to maintain BUY recommendation on the stock.
Key risk to our recommendation would come from sharp hike in gas prices or rupee
depreciation or demand slowdown.

LINK
http://www.kotaksecurities.com/pdf/pdfs/FUNDKAJARIACER15012015100009.pdf