Navkar Corporation Ltd Initiating Coverage Report By Nirmal Bang

Going forward, since all the expansion is expected to get completed by FY17E, we expect the company to exhibit high growth. We expect the company sales to grow by 60.1% in FY17E and 65.9% in FY18E. Historically, adjusting to the sale of traded goods, Navkar was enjoying the Ebitda Margins in the range of 39.7% to 45.5% in the year FY12- FY16. Since, expansion is on cards, we expect operating margins to decline by 459bps in FY17E as compared to an improvement of 250bps in FY16. Navkar although generates a high operating cash flow but higher capex leads to negative FCFF. Since major capex for expansion is expected to get completed by FY17 Navkar is likely to generate positive free cash flow of Rs 153.6 cr in FY18E.We expect company to report PAT of Rs 111.7cr and Rs 206.6cr in FY17E and FY18E. Navkar is likely to do Ebitda of Rs 346.8 cr and EPS of Rs 14.5 in FY18E and is trading at EV/Ebitda of 9.71x and PE of 14x FY18E EPS Long term outlook looks positive. We recommend to BUY Navkar with target price of Rs 261(29% stock return) in a year’s time.