Anand Rathi has given Buy recommendation for Nilkamal with a target price of Rs. 2985 in its research report issued on Sep 26, 2022
Anand Rathi’s research report on Nilkamal
Nilkamal management expects 11-15% overall volume growth in FY23. It aims to double revenue in the next 5-6 years, with 12-15% margins Performance expected to be healthy. The demand environment seems encouraging. Price hikes in material handling would continue as earlier higher input costs were not fully passed on. In the furniture business, however, earlier price hikes have been adequate. Raw material tailwinds expected by Q4. Volatility in key raw materials such as polyethylene and polypropylene continues. However, prices, which were softer in Jul/Aug, started firming up in Sep. Management expects a favourable pricing scenario from Q4 FY23. Aims to be a one-stop home-furnishing-solutions provider. Plastic furniture has a small market size, while in non-plastic furniture the opportunity size is significant. Hence, after the Boston Consulting group report on the furniture business revamp, the company is striving to scale up the non-plastic furniture business. Strengthening its manufacturing, marketing abilities in non-plastic furniture. Capex at Hosur for non-plastic furniture is progressing. On the land acquisition being completed by Dec, the facility is expected to be operational within 6-9 months, ie, Q1/Q2 FY24.
Outlook
The demand environment looks encouraging. Input cost tailwinds would provide headroom for margin expansion. Hence, we expect 13% and 54% CAGRs over FY22-24 in revenue and earnings, respectively. We have a Buy rating on the stock, with an unchanged TP of Rs.2,985, based on 22.5x FY24 earnings.