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Anand Rathi Sees 47% Upside In This Plastics Sector Stock, Buy Call Assigned
Anand Rathi has recommended investors to buy Nilkamal Ltd with a target price of Rs 2838 apiece. If you buy Nilkamal shares today at the current market price of Rs 1936 apiece, you will receive potential 47% return. Nilkamal's Q2 revenue was up 9.2% y/y to Rs8bn, but its EBITDA and PAT were respectively 1.5% and 15.4% lower y/y to Rs660m and Rs239m. Check key takeaways below:
1. Nilkamal Stock Outlook
The current market price of Nilkamal is Rs 1936 apiece with 52-week high at Rs 2767 apiece and 52-week low at Rs 1695 apiece, respectively. The small cap company has a market capitalisation of Rs 2889 crore. The stock has given a return of 22% in last 5-years, 48% in last 3-years, and declined 15% in last 1-year.
2. Nilkamal Lifestyle Category Delivers Healthy Growth
The Lifestyle business grew 20.1% y/y to Rs633m, while the plastic product business grew 8.8% y/y to Rs7.5bn. E-commerce grew a robust 45%y/y to Rs368m while the mattress business was 9.6% lower y/y to Rs280m.
3. Nilkamal H2 To See Better Margins
The gross margin improved due to easing input cost pressures, and is likely to continue. Also, the better business outlook is expected to drive operating leverage in H2 and enhance the margin profile. Management believes that the softening trend of raw material prices would help increase the company's H2 FY23 profitability.
4. Nilkamal Outlook, Valuation
According to Anand Rathi, "The demand environment looks encouraging. Input cost tailwinds would provide headroom for margin expansion. Hence, we expect 12% and 44% CAGRs over FY22-25 in revenue and earnings respectively. We maintain our Buy rating, with a lower target price of Rs2,838 based on 17x FY25e earnings (a 15% discount to the five-year average P/E multiple), earlier Rs2,985 based on 22.5x FY24e earnings."
5. About Nilkamal Ltd
Nilkamal operates with three segments that include plastics, lifestyle furniture, furnishings & accessories and storage system & others. The plastics segment manufactures injection moulded plastic articles, polymers and others.
The lifestyle furniture, furnishings & accessories is engaged in manufacturing of home furniture, home furnishing and accessories. The storage system & others is engaged in metal storage systems.
Disclaimer
The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.
