Though I was a bit hopeful of a better Q2, it looks like market has priced this stock superbly for the Q2 results (due to monsoon worries, may be) and the results came in just like that. Not much revenue growth but good margin kicker. Looks like margin improvement story is playing out as expected.
Today’s management interview stated that some revenue in CSM shifted to H2 (may be he is alluding to the new plant commissioning?)
Some calculations:
FY 15 revenue: 1939 (rounded off).
1939*1.18 = 2289 crore revenue estimate for FY 16 at lower guidance of management (18%-20%).
Revenue covered so far in H1 2016 is 995 crore, so revenue of 1293 crore estimated for H2 FY16. Company delivered net margins of 14.5% and as per Salil’s interview he expects margin improvement by a few basis points, so let’s assume 15% NPM.
So net profit for H2 FY 16 would come to around, 15% * 1293 = 194 crore, which gives an EPS of 14.25 and full year FY16E EPS of 14.25+10.6= 25 EPS.
What PE one gives is subjective but with 25 EPS for FY16E on a conservative basis as per management guidance, the stock looks like little down side and good upside. PI is turning out to be a sustainable story where one can invest without losing sleep.
Disclosure: I hold so I may have vested interest on the stock.
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