Shankara Building Products Ltd - BUY - TP Rs.1654 - Result Update - Kotak

- Revenues for Q2FY18 reported a decline of 5% YoY due to unprecedented monsoons in its key operating regions, strained cash flows with channel partners owing to GST implementation as well as slower demand from builder segment owing to RERA implementation. Also, before GST regime, excise duty was a part of revenue. Post GST implementation, excise duty is subsumed in GST and not a part of revenue, hence revenue are not comparable. Margins witnessed an improvement led by increased proportion of retail revenues in the overall mix and strong same store sales growth. Company has added nearly 6 stores during the quarter and maintains its store addition target of 15-20 during the current fiscal. It has also added new brands thereby increasing the product categories and range of offerings.

- We continue to remain positive on the company as it is likely to benefit from increasing shift towards organized retail in home building segment. Company is witnessing improved traction in the retail segment with better than expected margins, addition of more brands and addition of large format stores at low rentals. Owing to this, we upgrade our valuation multiples for Shankara building products and arrive at a revised price target of Rs 1654 based on average of 33x P/E and 17x EV/EBITDA multiples on FY19E on consolidated basis. We continue to maintain BUY recommendation on Shankara Building Products (Rs.1528 earlier based on 30x PE and 16x EV/EBITDA on FY19E).

Shares of Shankara Building Products Ltd was last trading in BSE at Rs.1501.2 as compared to the previous close of Rs. 1481.8. The total number of shares traded during the day was 5384 in over 467 trades.

The stock hit an intraday high of Rs. 1514.4 and intraday low of 1484.35. The net turnover during the day was Rs. 8076606.

Source : Equity Bulls

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