Technology

For 1QFY2017, Linc Pen & Plastics Ltd (LPPL)’ results have come in in line of
our estimates on the top-line as well as the bottom-line front. Its top-line grew
10% yoy while on the operating front, the company reported
margin improvement, primarily on account of lower raw material costs. Further,
the net profit grew by ~17% yoy to Rs4.4cr aided by higher sales growth and a
strong operating performance.
Top-line grew 10% yoy: The top-line grew by ~10% yoy to Rs87cr on the back
of good growth in the domestic as well as the exports segment.
PAT grew ~17% yoy: On the operating front, the company reported margin
expansion by 149bp yoy to 9.6%, primarily on account of lower raw material
costs. The reported net profit grew by ~17% yoy to Rs4.4cr aided by higher sales
growth and a strong operating performance.
Outlook and valuation: Going ahead, we expect LPPL to report a top-line CAGR
of ~10% over FY2016-18E to ~Rs420cr owing to strong domestic as well as
export sales. On the bottom-line front, we expect the company to report ~13%
CAGR to Rs23cr over FY2016-18E. This would be on account of expansion in
operating margin on the back of lower material prices and higher exports (which
is a high margin business). We recommend an Accumulate rating on the stock
with a target price of Rs283.

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