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H i g h e r d e p r e c i a t i o n e at s i n t o b o t t o m l i n e …
Bombay Rayon Fashions’ (BRFL) Q2FY12 results were a mixed bag. While
the topline was in line with our estimates and EBITDA margin came in
higher than our expectations, PAT numbers were disappointing. In
Q2FY12, net sales increased 21.2% YoY to | 634.1 crore marginally ahead
of our estimates of | 616.1 crore led by strong growth in the fabric
segment. During FY11, BRFL increased its fabric capacity from 220 million
metre to 235 million metre and is now enjoying the benefits therefrom.
The EBITDA margin slipped by 174 bps YoY (but came in higher than our
estimate of 25.1%) to 26.6% due to increased job work charges and other
expenses. Despite a superior operational performance, PAT dipped by
12.5% YoY to | 54.4 crore lower than our estimate of | 65.2 crore. PAT
was weighed down by higher depreciation outgo. For the first half ended
September 2011, net sales and EBITDA increased by 20.7% and 15.2% to
| 1,237.9 crore and | 318.0 crore, respectively. However, PAT slipped
marginally to | 111.2 crore vs. | 114.4 crore in H1FY11.
ƒ Open offer updates
In April 2011 AAA United BV (AAA United), along with
Aktieselskabet and Ashwell Holding Co Pvt Ltd, had made an open
offer to shareholders of BRFL. However, the same was deferred and
is now open up to November 23, 2011. We continue to maintain our
view that investors should exit at current market prices.
V a l u a t i o n
The stock is trading at 14.7x and 11.3x its FY12E and FY13E EPS of | 19.8
and | 25.9, respectively. The company has historically traded at ~13.0x
one year forward earnings. However, considering the acquisition of a
71% stake in STI India (which has recently turned around from losses to
marginal profits) and rising working capital needs of the company, we
have discounted the same by 25%. Hence, we have valued the stock at
9.5x FY13E EPS of | 25.9 to arrive at a target price of | 246. We reiterate
our SELL rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H i g h e r d e p r e c i a t i o n e at s i n t o b o t t o m l i n e …
Bombay Rayon Fashions’ (BRFL) Q2FY12 results were a mixed bag. While
the topline was in line with our estimates and EBITDA margin came in
higher than our expectations, PAT numbers were disappointing. In
Q2FY12, net sales increased 21.2% YoY to | 634.1 crore marginally ahead
of our estimates of | 616.1 crore led by strong growth in the fabric
segment. During FY11, BRFL increased its fabric capacity from 220 million
metre to 235 million metre and is now enjoying the benefits therefrom.
The EBITDA margin slipped by 174 bps YoY (but came in higher than our
estimate of 25.1%) to 26.6% due to increased job work charges and other
expenses. Despite a superior operational performance, PAT dipped by
12.5% YoY to | 54.4 crore lower than our estimate of | 65.2 crore. PAT
was weighed down by higher depreciation outgo. For the first half ended
September 2011, net sales and EBITDA increased by 20.7% and 15.2% to
| 1,237.9 crore and | 318.0 crore, respectively. However, PAT slipped
marginally to | 111.2 crore vs. | 114.4 crore in H1FY11.
ƒ Open offer updates
In April 2011 AAA United BV (AAA United), along with
Aktieselskabet and Ashwell Holding Co Pvt Ltd, had made an open
offer to shareholders of BRFL. However, the same was deferred and
is now open up to November 23, 2011. We continue to maintain our
view that investors should exit at current market prices.
V a l u a t i o n
The stock is trading at 14.7x and 11.3x its FY12E and FY13E EPS of | 19.8
and | 25.9, respectively. The company has historically traded at ~13.0x
one year forward earnings. However, considering the acquisition of a
71% stake in STI India (which has recently turned around from losses to
marginal profits) and rising working capital needs of the company, we
have discounted the same by 25%. Hence, we have valued the stock at
9.5x FY13E EPS of | 25.9 to arrive at a target price of | 246. We reiterate
our SELL rating on the stock.
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