At the CMP, the stock is trading at an attractive valuation of ~4.7x FY19E EPS. While valuations appear to be cheap, the USITC’s affirmation on the US market getting materially injured/threatened due to imports of quartz surface products from India and Turkey could lead to antidumping duty being imposed on quartz surfaces imported from India though the management could challenge any negative finding, going forward. While we are currently awaiting clarity in terms of quantum of antidumping duty on quartz, any development on this front could have a negative impact on Pokarna’sfinancial performance. Hence, we downgrade the stock to HOLD with a revised target price of Rs 140/share (6x FY20E EPS).
At the CMP, the stock is trading at ~6.5x FY19E EPS. We like Pokarna, given its increasing focus on high-margin quartz business, its owned quarries and technological moat (Bretonstone technology) in India. We believe the new quartz facility in Hyderabad will further help the company increase its share in the US market. We maintain BUY rating with a target price of Rs 215 per share (9x FY20E EPS). Any imposition of antidumping duty by US on Indian Quartz would remain a key risk for the stock.