Saturday, July 19, 2008

Stock Idea: Pennar Industries

Karvy Stock Broking has maintained its buy rating on Pennar Industries with a target price of Rs 40 in its July 18, 2008 research report. "For Q1FY09, we expect Pennar Industries Ltd (PIL) to report a mixed result with strong sales growth but with margin contraction. In Q1 FY09, net sales is expected to exhibit a growth of 32% (YoY) and 6% (QoQ) at Rs 1707 million. We estimate net profit to be Rs 97 million, translating into EPS of Rs 0.76 for Q1 FY09."
"At the current price of Rs 28, PIL is trading at 8.4x FY09 and 7x FY10 earnings. Based on earnings, we value PIL at Rs 32/share (8x of FY10 EPS). This is backed by EPS growth of 30% (CAGR) for FY08-FY10. To add that, PIL is likely to unlock value from real estate holding, that is estimated to be around Rs 8/ share ( refer our report published on 14th March, 2008). Hence, we reiterate our BUY rating on PIL with a price target of Rs 40/share (against previous target of Rs41/ share). Currently, PIL is trading at EBITDA multiple of 6xFY09 and 5x FY10. Our target price also reflects an EBITDA multiple of 6x on FY10," says Karvy's research report.


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