Khambatta Securities has given Buy recommendation for Vishwaraj Sugar Industries with a target price of Rs. 43 in its research report issued on Jan 18, 2022

Khambatta Securities’ research report on Vishwaraj Sugar Industries

Vishwaraj Sugar Industries Limited (VSIL) reported robust revenue growth during the quarter. Revenue from operations stood at ₹ 133.3 crore (up 61.1% y-o-y and 30.0% q-o-q). ~66% of the total revenues were contributed by the Sugar segment, followed by Distillery at 25%. The revenue contribution of the Cogeneration segment declined to 6% vs 10% in 3Q FY21. EBITDA for 3Q FY22 was marginally up (+0.6% y-o-y) to ₹ 43.7 crore. The EBITDA margin declined to 32.8%, compared to 52.5% reported in the same quarter last year. Higher raw material cost and other manufacturing expenses led to the decline in EBITDA margin. The net profit stood at ₹ 29.4 crore in 3Q FY22, a y-o-y decline of 3.4%. On a sequential basis, net profit witnessed multiple-times growth (₹ 19 lakh in 2QFY22).

Outlook

VSIL stock currently trades at forward P/E level of 15.8x FY24E EPS. As we extend our forecast period to FY24 from FY23, we adjust our target P/E (35x to 28x) to reflect the farther-out earnings projections as the basis of our valuation. At 28x FY24E EPS, we rate VSIL a BUY with a price target of Rs 43 and an upside potential of 77%.

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