Technology

For 4QFY2016, Linc Pen & Plastics Ltd (LPPL) outperformed our estimates on both
the top-line and the bottom-line front. The company’s top-line for the quarter
grew 13% yoy. On the operating front, the company reported
margin improvement, primarily on account of lower raw material costs. Further,
the net profit grew by ~65% yoy to Rs6.3cr aided by higher sales growth and a
strong operating performance.
Top-line grew ~13% yoy: The top-line for the quarter grew by ~13% yoy to
~Rs105cr, with the company posting good growth in the domestic (~6% yoy to
Rs68cr) as well as the exports segment (~30% yoy to Rs37cr).
PAT grew ~4% yoy: On the operating front, the company reported margin
expansion by 268bp yoy to 10.1%, primarily on account of lower raw material
costs. The reported net profit grew by ~65% yoy to Rs6.3cr 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 ~Rs416cr owing to strong domestic as well as
export sales. On the bottom-line front, we expect the company to report ~9%
CAGR to Rs22cr 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 a Buy rating on the stock with a target
price of Rs235.

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