Buy Himadri Speciality Chemical; target of Rs 125: ICICI Direct

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ICICI Direct's research report on Himadri Speciality Chemical

Himadri Speciality Chemical (HSCL) reported a steady Q4FY19 performance. The positive surprise was smart control in net working capital cycle with consequent reduction in absolute debt to the tune of ~Rs 200 crore in FY19. Total carbon sales volume for the quarter came in at 88800 tonne. Total revenues in Q4FY19 came in at Rs 583.4 crore, up 6% YoY. EBITDA in Q4FY19 came in at Rs 123.3 crore with corresponding EBITDA margins at 21.1%, down 150 bps QoQ. PAT in Q4FY19 came in flat at Rs 72 crore.

Outlook

HSCL, through internal efficiencies as well as robust product demand, has successfully transformed itself into a steady and capital efficient business model realising ~20% margins and ~20% return ratios. It has a lean balance sheet with debt: equity at 0.3x as of FY19. Given healthy double digit topline and bottomline growth prospects (15% CAGR), we remain positive on the stock and maintain our BUY rating. We value HSCL at Rs 125 i.e. 13.0x P/E on FY21E EPS of Rs 9.7/share. We also derive comfort from average CFO yield over FY19-21E at >5%.

For all recommendations report, click here

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