GHCL Ltd. share price target

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GHCL’s Q3 EBITDA at Rs2.3bn (+53% YoY/+9% QoQ) was above our estimates largely due to operational efficiency resulting in cost savings (volumes are flat YoY/QoQ).

GHCL's Q4FY19 numbers were above our estimates on all parameters. Soda Ash segment continued with its strong performance, supported by tight demand supply in the domestic market resulting in outperformance. Strong operating performance, led to 44.3% YoY and 15.7% QoQ jump in PAT to...

The company is currently trading at a FY20PE of 7x,

GHCL's Q1FY19 PAT was below our estimate due to higher expenses of Rs220mn pertaining to the MTM loss and annual maintenance shutdown, which impacted the inorganic chemical segment performance. The textile segment reported sequential improvement in performance, supported by spinning segment. EBITDA during the quarter declined 10%/17% YoY/QoQ to...

Decent Overall Performance: GHCL posted revenue growth of 11.3% toRs. 8013 Mn in Q1FY18 against corresponding quarter period of Q1FY17 on YoY basis. The inorganic chemical grown YoY at 17.2% and Home Textile Division recorded muted to de-growth of -0.6% on YoY basis. During Q1FY18, EBITDA de-grew YoY by 10.8% to Rs. 1641 Mn against Rs. 1840 Mn in Q1FY17.

Robust growth with improving profitability: GHCL recorded revenue of Rs. 8790 Mn in Q4FY17 which is up by 27.4% YoY on the back of growth in inorganicchemical by 20.7% and Home Textile growth of 38.5% YoY basis. During Q4FY17, EBITDA grew by 4.9% to Rs. 1830 Mn from Rs. 1745 Mn in Q4FY16. EBITDA margin stands at 20.8% in Q4FY17, down by 447 bps as against of 25.3% in Q4FY16. It got impacted due to sharp price increase in major commodities like coal & coke in last two quarters and increased consumption of imported lime stone.

De-growth in Q3FY17 on the back of Demonetization; CapacityUtilization and Capex Hold Key for Future: Revenue for Q3FY17 came at Rs. 6573 Mn as against Rs. 6989 Mn in Q3FY16, witnessing decline in growth by 6.0% YoY basis. The decline in revenue was because of challenging environment due to demonetization. However, EBITDAgave pleasant surprise in terms of improving growth of 6.3% YoY and EBITDA margin improved by 277 bps during the quarter. PAT registered growth of 20.5% YoY as a result of improved EBITDA margin and decline in finance cost by 15.9%YoY. Looking at sectoral performances, Inorganic Chemical declined by 5.0% YoY basis due to demonetization while textile revenue declined by 8.3% YoY basis mainly because of rescheduling of shipment in textile segment's order of Rs. 260 Mn.

Capex Addition to Drive Growth across All Segments: The company has capex plan of Rs. 1430 Mn and Rs.370 Mn respectively for SodaAsh and Textile for FY17E and has plan to allocate Rs. 800 Mn & Rs.673 Mn for soda ash & textile divisions, respectively by FY18E to increase their productioncapacity. Thus, capacity expansion and maintaining of capacity utilization in the range of 85-90% in forthcoming years will enhance topline growth.

BUY GHCL Ltd at CMP Rs. 233 and on dips to Rs. 202-209 for the sequential targets of Rs. 270-303

We initiate coverage on GHCL with a BUY. Our TP is Rs 290, valuing GHCL at an affordable 8x FY18E earnings. It has made a strong comeback after an an overambitious and ill-fated overseas expansion over FY05-07.