Analysts upbeat on Nilkamal shares post Q4 earnings

Nilkamal shares rose 6.88 per cent to Rs 519.20 on Friday as market sentiments turned bullish for the company post its Q4 earnings announced earlier this week.

The Mumbai-based company, Asia's largest plastic processor of moulded products and also the world's largest manufacturer of moulded furniture, registered net profit of Rs 21.69 crore for the quarter ended March 2015 - up 53.49 per cent against Rs 14.13 crore in the corresponding quarter a year ago. Its gross sales for the quarter rose by 5.88 per cent year-on-year (yoy) to Rs 488.14 crore.

Shares of the company have already gained 5.52 per cent in the past two trading sessions.

Angel Broking sees the company's shares at Rs 597 in the next 12 months.

"We expect the company's plastics business to post a CAGR of 10.3 per cent, with an upturn in the economy, over FY2015E-2017E, which will aid the company to post revenue CAGR of 9.2 per cent, over the same period, to Rs 2,131 crore. Operating profit margin is expected to stabilise at current levels and improve by 48 basis points over FY2015-17E to 8.3 per cent. Bottom line of Nilkamal will grow at CAGR of 27 per cent over FY2015- 17E to Rs 69 crore," the brokerage said in a research note.

During January-March period, Nilkamal benefitted from lower raw material costs as polymer prices were declined by 18 per cent due to slide in crude oil prices. The raw material cost as a percentage of sales declined by 198 basis points yoy to 62.3 per cent. However, employee costs and other expenses increased by 47 basis points (yoy) and 78 basis points (yoy) to 5.8 per cent of sales and 22 per cent of sales, respectively.

The company has also lowered its debt significantly; resultantly, a lower interest cost is expected to boost the bottom-line.