Nilkamal Research Report By IDBI Capital

Good start!!!

Summary

Nilkamal’s (NILK) Q1FY19 results were largely in-line with our estimates. Revenue was up 17.3% YoY to Rs5.7bn, EBITDA was up by 26.6% to Rs549mn and PAT was up 37.1% at Rs307mn. Plastic segment registered volume and value growth of 13% and 21% respectively on a YoY basis. Retail segment registered a de-growth of 12% YoY mainly due to increased pre-GST sales in Q1FY18, whereas it remains flattish on QoQ basis. The company’s mattresses business grew by 40.5% YoY to Rs164.7mn. We are almost keeping our TP unchanged at Rs2,057 (20x on FY20E EPS) from earlier Rs2,072. Maintain BUY.

Key Highlights and Investment Rationale

 Robust volume growth; higher RM prices making a dent

The company witnessed strong volume growth of 13% YoY (IDBIest 10%) and realization growth of 8% in Q1FY18. However, despite higher volume EBITDA margin was below expectation due to higher RM prices which impacted margin negatively by 136bps on a QoQ basis.

 New stores and volume to drive growth

The company has incurred a capex of Rs235mn in Q1FY19 towards new plant and equipment which would help to increase the volume growth of the company. Also, a new retail store is opened at Indore and is likely to open few other stores in next two years which would give a good growth to the retail segment. We expect its revenue/EBITDA/PAT to see a CAGR of 13%/13%/15% during FY18-20E.

 Keeping TP largely unchanged at Rs2,057; Maintain BUY

The stock is trading at a P/E multiple of 20x and 17.4x on FY19/20E. We largely maintain our estimates and keeping our target price largely unchanged at Rs2,057 from Rs2,072 which is based on 20x on FY20E EPS of Rs102.9. We expect the company to benefit from higher economic growth and rising per capita income. Maintain BUY.