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I m p a c t e d b y r u p e e d e p r e c i a t i o n …
Alok Industries’ (Alok) Q3FY12 numbers were ahead of our estimates on
the topline and operating front. However, the bottomline performance
came as a negative surprise. The company reported a topline, EBITDA
margin and loss of | 2,386.7 crore, 26.9% and | 36.6 crore, respectively.
The operating margin improved by 106 bps YoY due to lower raw
material costs. During the quarter, the company made a marked-tomarket (MTM) provision of | 184.2 crore on account of the depreciation of
the rupee. Consequently, the company reported a loss despite a good
operational performance. On account of this, we have revised our FY12E
estimates downwards by 46.4%. Further, due to a delay in any concrete
announcement of the real estate monetisation, we believe the higher debt
burden will continue for some part of FY13E as well. Consequently, we
have revised our FY13E estimates downwards by 4.5%.
ƒ Real estate monetisation plans delayed by a few months
The company did not make any new announcements regarding
monetisation of the real estate business. However, the management
indicated that a token amount was received and enquiries are
turning into buying decision. There would be a delay in the actual
transaction (from the management’s earlier estimates of March
2012). The management believes a large part of the deals should
close by H1FY13E as against the earlier estimated FY12E.
V a l u a t i o n
Alok has continued to demonstrate a robust topline growth on the back of
capacity addition. However, the adverse rupee movement (considering
~20% of the company’s debt is foreign currency denominated) has
dented the bottomline of the company. We have revised our earnings
estimates downwards bearing in mind factors like adverse rupee impact
and the delay in real estate liquidation. However, the management’s
conviction of becoming free cash flow positive and reducing debt remain
the long term positives for the company. The stock is currently trading at
6.5x and 3.1x its FY12E and FY13E EPS, respectively. We have reduced
the target multiple from 3.8x to 3.5x FY13E EPS due to a delay in land
monetisation, which will lead to higher interest costs. We maintain our
BUY rating on the stock with a revised target price of | 25.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
I m p a c t e d b y r u p e e d e p r e c i a t i o n …
Alok Industries’ (Alok) Q3FY12 numbers were ahead of our estimates on
the topline and operating front. However, the bottomline performance
came as a negative surprise. The company reported a topline, EBITDA
margin and loss of | 2,386.7 crore, 26.9% and | 36.6 crore, respectively.
The operating margin improved by 106 bps YoY due to lower raw
material costs. During the quarter, the company made a marked-tomarket (MTM) provision of | 184.2 crore on account of the depreciation of
the rupee. Consequently, the company reported a loss despite a good
operational performance. On account of this, we have revised our FY12E
estimates downwards by 46.4%. Further, due to a delay in any concrete
announcement of the real estate monetisation, we believe the higher debt
burden will continue for some part of FY13E as well. Consequently, we
have revised our FY13E estimates downwards by 4.5%.
ƒ Real estate monetisation plans delayed by a few months
The company did not make any new announcements regarding
monetisation of the real estate business. However, the management
indicated that a token amount was received and enquiries are
turning into buying decision. There would be a delay in the actual
transaction (from the management’s earlier estimates of March
2012). The management believes a large part of the deals should
close by H1FY13E as against the earlier estimated FY12E.
V a l u a t i o n
Alok has continued to demonstrate a robust topline growth on the back of
capacity addition. However, the adverse rupee movement (considering
~20% of the company’s debt is foreign currency denominated) has
dented the bottomline of the company. We have revised our earnings
estimates downwards bearing in mind factors like adverse rupee impact
and the delay in real estate liquidation. However, the management’s
conviction of becoming free cash flow positive and reducing debt remain
the long term positives for the company. The stock is currently trading at
6.5x and 3.1x its FY12E and FY13E EPS, respectively. We have reduced
the target multiple from 3.8x to 3.5x FY13E EPS due to a delay in land
monetisation, which will lead to higher interest costs. We maintain our
BUY rating on the stock with a revised target price of | 25.
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