S H Kelkar & Company's Q3FY18 results (Outperformer) - Strong recovery
Q3FY18 results
SHK’s reported revenue growth ahead of our estimates, while PAT was in line with our estimates.
- SHK’s reported revenue growth of 22.2% yoy to Rs2.8bn (est: Rs2.7bn) driven by strong performance of fragrance business which registered 25.8% yoy growth.
- Gross margins declined by 240bps to 46.1% due to short-term disruptions in raw material imports. However, positive operating leverage led to 330bps expansion in EBITDA margins to 20.3%. EBITDA increased by 45.6% yoy to Rs576m (est Rs469m).
- An exceptional item of Rs100.7m was reported in Q3FY18 on account of operational reorganisation of PFW in Netherlands. PAT (including exceptional item) increased by 7.2% to Rs271.9m (est Rs272m)
Key positives: Strong volume growth in Fragrance business
Key negatives: Decline in gross margins
Impact on financials: FY18/19E EPS unchanged, we introduce FY20e EPS of Rs13.4/sh. TP rollover to FY20E EPS multiple, raised to Rs403/sh.
Valuations & view
SHK’s reported robust performance in Q3FY18 led by strong volume growth in the fragrance division on the back of improved FMCG demand. On the profitability front, SHK’s focus on consolidating manufacturing facilities and rationalising working capital is set to augur well. In the long term, SHK’s large revenue exposure to mid-sized domestic FMCG companies that are witnessing faster growth, new client additions (Patanjali, Haldiram and Himalaya) both organically and inorganically and increasing focus on fine fragrance are the key growth drivers. Considering earnings CAGR of 23% over FY17-20E, improvement in RoCE (17.2% in FY17 to 23%in FY20E),healthy free cashflow generation (~Rs2.5bn over FY17-19E) ,debt free balance sheet, we maintain outperformer with a revised target price of Rs403/sh
S H Kelkar and Company Limited is an India-based fragrance and flavors manufacturing company. The Company is engaged in offering fragrances in various categories, such as personal care, hair care, skincare and cosmetics, fabric care, household products and fine fragrances. The Company offers flavors in various categories, such as dairy products, beverages, confectionery, bakery products and pharmaceuticals. It also offers a range of services, which include bio technology research service, cosmetic research service, cosmetic testing laboratory and custom synthesis services.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.