For Q4FY2018, GMM Pfaudler (GMM) posted a growth of 11%/14% yoy growth in revenue / PAT amid ~300 bps margin expansion. The company is seeing good traction from its user industries like agrochemicals, which would drive 15-20% revenue growth in next two years.
Heal thy order book: Q4's top-line rose by 11% led by robust execution. Its subsidiary - MAVAG also did quite well with 7% yoy growth in FY2018 revenue. Its FY2019 opening order backlog is much higher than that of FY2018. Pharma sector share has come down from historical 50% to 30% of revenue. Orders from Pharma City is likely to pick up in the next 6-9 months.
Margins were decent: Operating margin were robust at 16.4% due to better product mix and cost optimization. MAVAG has almost tripled its FY2018 profits to Rs. 14 cr owing to better absorption of fixed cost. MAVAG is likely to sustain operating margin at ~17% level.
Outlook and Valuation: We have fine tuned our earnings estimates in view of FY2018 results. We are expecting a CAGR of ~18%/20% in revenue / earnings over FY18-20E. The stock has given 21% return since our initiation in April and is currently trading at 20x its FY2020 earnings which largely trails its earnings growth trajectory. Hence, we recommend Accumulate with a target price of Rs. 920 (22x FY2020E EPS).
Shares of GMM PFAUDLER LTD. was last trading in BSE at Rs.840 as compared to the previous close of Rs. 874.35. The total number of shares traded during the day was 2098 in over 143 trades.
The stock hit an intraday high of Rs. 886.95 and intraday low of 840. The net turnover during the day was Rs. 1778636.