Accumulate Hindustan Dorr Oliver - Way2Wealth

1st Quarter Highlights

- Raw materials consumed have been higher as a % of sales from 79% to 82.6% but sequentially qoq it has moved down from 83.1% to 82.6% attributed due to lower metals prices. Consequently operating margins have gone down yoy from 12.4% to 11.8% but qoq it has increased from 10% to 11.8%.

- Interest cost as a percentage of sales have gone down from 2.1% to 1.7% reflecting lower cost of interest rates. Depreciation sequentially has remained almost flat representing no incremental additions to assets.

- As a result PAT margins have increased qoq from 4.7% to 6.6% whereas yoy it has gone down from 7.1% to 6.6%.

Valuations

At the CMP of Rs 144, the stock quotes at PE of 13x and 11x its FY11E and FY12E cons. earnings of Rs 10.9 and 13.7 respectively. We give an Accumulate Rating on the stock, with a target price of Rs. 164 based on a PE of 12x consolidated FY12E EPS of Rs. 13.7 per share.

Source : Equity Bulls

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