For Q1FY2019, GMM Pfaudler (GMM) posted a growth of 35.4%/63.9% yoy growth in revenue/ PAT amid ~494 bps margin expansion. The company is seeing good traction from its user industries like agrochemicals, which would drive 15-20% revenue growth in next two years. In view of robust demand, it is expanding its capacities by 25% in FY2019.
Outlook and Valuation: We have increased earnings estimates for improvement in margins and robust order book. We are expecting a CAGR of ~19%/26% in revenue/ earnings over FY18-20E. The stock has given 44% return since our initiation in April and is currently trading at 17x its FY2020 earnings which still looks attractive given its robust earnings growth trajectory. Hence, we recommend BUY with a target price of `1200 (26x FY2020E EPS).

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