ICICI Direct has given Buy recommendation for Shaily Engineering Plastics recommended buy rating on the stock with a target price of Rs 1670 in its research with a target price of Rs. 1670 in its research report issued on Jun 02, 2021
ICICI Direct’s research report on Shaily Engineering Plastics
Shaily reported a strong performance in Q4FY21 with revenue, PAT growth of ~38%, ~40%, respectively. Further, the company has guided for strong revenue growth in FY22 despite lockdown related disruptions in Q1. A home furnishing major (HFM) remains a key contributor to the overall topline (55% of overall revenue). However, significant growth opportunities in the healthcare segment (revenue growth of 2-3x in the next three to five years) and strong order pipeline in the toy business provide strong revenue visibility in the next two years. With better operating leverage and a complete pass on mechanism of inflationary pressure to its clients (with a lag of three months), we see improvement in EBITDA margin in FY21-23E. Better cash flows, going forward, will be utilised to fund future capex and reduce debt (FY21 debt at ~Rs 173 crore). That is expected to result in a robust PAT CAGR of ~66% in FY21-23E.
We believe Shaily is on a strong footing considering diversification into new product category and strong order book from existing customers. We maintain our BUY rating on the stock with a revised target price of Rs 1670 valuing the company at 25xFY23E earnings (earlier target price Rs 1060).