IFGL Refractories Limited share price target

CMP: Rs265, MCap: Rs9.5 bn l Fair Value: Rs600 Coming of Age and ready to re-rate IFGL Refractories is a well-established player in a hard to master refractories business and has marquee client relationships with a track record spanning 4 decades. The company has come of age in last few years and is likely to re-rate materially led by the following: Blowout Earnings growth after 4-5 years of consolidation IFGL is expected to deliver blowout earnings growth with Consolidated EBITDA expected to double to Rs180-200cr (in FY22-23E) vs Rs90-100cr range of last 3-4 years. This is led by i.) several proactive steps taken by the management (capacity expansion at all domestic plants of Kandla/Orissa/Vizag and recruitment of industry veterans from peers at key positions), ii) gain in market share in...

stream by Mar-2020 and has a revenue potential of Rs ~900-1000 mn on a capex of Rs Others ~150 mn. IFGL's second expansion would be in Vizag, which would entail a capex of Rs Source: BSE, *as on 29th July 2019 ~500 mn and would be done over 3 phases with a revenue potential of Rs ~2500-3000 mn. Vizag expansion would add new products, help IFGL service steel plants in the south, lower logistics costs and boost exports. Global subsidiaries well placed to deliver: IFGL's ~52% revenue comes from its global subsidiaries, with Monocon contributing 28%, EI ceramics contributing 15% and Hofmann adding 9% to the consolidated revenue. EI ceramics has been the best...

Management interaction takeaways - Strong growth ahead We recently had a detailed interaction with senior management of IFGL refractories and key takeaways were i) Revenue growth at an inflection point with consolidated topline growth expected at 15%+ for FY19E led by pricing growth of 5-7% and volume growth of 8-10%), ii) well invested asset base with completion of recent expansions at domestic as well as overseas operations placing IFGL favourably to meet increased demand and gain market share globally and iii) operating leverage benefits improving the margin profile. Management also...

Strong domestic show saves the day, retain Hold We maintain our Hold rating on IFGL Refractories as we see limited scope for further re-rating after stock's large outperformance to MNC peers in line with our view in last one year. Q2 performance was a mixed bag with domestic operations delivering strong results largely negated by weak results across all overseas subs. We continue to like IFGL's operationally sound high-quality global assets and expect strong earnings growth driven by i) increased share of higher-margin subs and ii) recovery in steel production in key markets of US/Europe/India (aided by...

Strong domestic show saves the day, retain Hold We maintain our Hold rating on IFGL Refractories as we see limited scope for further re-rating after stock's large outperformance to MNC peers in line with our view in last one year. Q2 performance was a mixed bag with domestic operations delivering strong results largely negated by weak results across all overseas subs. We continue to like IFGL's operationally sound high-quality global assets and expect strong earnings growth driven by i) increased share of higher-margin subs and ii) recovery in steel production in key markets of US/Europe/India (aided by...

Business Momentum Continued Despite Demonetisation: As small and medium units dependent on off-the-shelf products were impacted initially when demonetisation was announced; nevertheless activity reachingnormalcy. During Q3FY17, consolidated revenues reaching to Rs.1,830mn higher by 7.1% on YoY basis and lower by 5.2% sequentially. Standalone revenues reached to Rs.937mn which is a growth of 30.8% and 14.6% on YoY and QoQ basis respectively.

IFGL Refractories Net Sales for FY15 grew marginally by 2% to Rs.7,968mn compared to FY14 Rs.7,810mn. FY15 sales performance of subsidiaries in Asia(ex.India) de-grew by 2.9% while European subsidiaries growth remained flat whereas Americas grew by 1.9% and Indian operations grew by 3%.

IFGL Refractories - Q3FY15 Results - First CutIFGL Refractories Net Sales for 9MFY15 grew marginally by 2.9% to Rs.5,940mn compared to 9MFY14 sales of Rs.5,773mn. For Q3FY15 Net Sales de-grew by 1.5% and 3.4% to Rs.1,917mn on a YoY and QoQ basis respectively.

Karvy initiates coverage of IFGL Refractories with a Buy Rating. Doubling of high margin shaped refractory capacity at Kandla Gujarat and Ohio USA, to commence production through FY15-16E. Kandla to serve European markets leading to lower distribution expenses and freeing up of capacity at Odisha plant to cater to domestic steel industry. We expect EPS to grow at a CAGR of 18.6% during FY14-16E to reach to Rs.25.7 and RoE and RoCE to reach to 21.4% and 26% respectively by FY16E.