Angel Broking is bullish on Indag Rubber (IRL) and has recommended buy rating on the stock with a target of Rs 1,234 in its research report dated April 13, 2015.
For 4QFY2015, Indag Rubber (IRL)'s top-line and bottom-line performance has come in better than our expectation. The company reported a top-line growth of 18% yoy, while its bottom-line grew by 49.6% yoy on back of overall improvement in operating margin. For the quarter, the company reported a top-line growth of 18.1% yoy to ~Rs 66cr, vs our expectation of ~Rs 59cr, on the back of improvement in industrial activity in the country. Higher utilization in the transportation segment led to higher sales growth in retreading products. For the quarter, the company's bottom-line came in at ~Rs 9cr, up 49.6% yoy, owing to improvement in operating margin, higher other income of ~Rs 0.6cr as against ~Rs 0.3cr in 4QFY2014, and a lower tax rate (down 301bp yoy).
Outlook and Valuation: "Going ahead, we expect IRL to report a top-line CAGR of 16.5% over FY2015-17E to ~Rs 329cr owing to recovery in commercial vehicle (CV) volumes in the domestic market. The CV segment reported improved sales growth of 5.4% yoy in 4QFY2015. A recovery in CV volumes will aid the company considering that ~85% of IRL's revenue comes from the medium & heavy commercial vehicle (MHCV) segment and ~5% of its revenue comes from the light commercial vehicle (LCV) segment. Going ahead, the company would improve its volume growth in the treading segment on back of growth in road freight with growth in economic activity, increase in organized players' market share, strong distribution network, and a strong brand. We expect IRL to report a net profit CAGR of 11.5% over FY2015-17E to ~Rs 40cr. Hence, we recommend a Buy rating on the stock with a target price of Rs 1,234", says Angel Broking research report.
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