INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Financial year 2017-18 was best ever for India’s IPO market by far, with as many as 45 mainboard issues hitting the Street and
raising a record Rs 82,109 crore.
Data from PRIME Database shows of the 45 companies, some sizzled and scaled up the ladder, while others
failed to reward investors.
Shankara Building Products was on the winning side
And it has just completed a year of listing with a stellar show.
The Bangalore-headquartered company had a dream debut on the bourses last
year, when its shares got listed on NSE on April 5, 2017 at Rs 555.05, a 21 per cent premium over the issue price of Rs 460
On BSE, the stock got listed at Rs 545, up 18.47 per cent from issue price.
That worked out to a market capitalisation of Rs 1,245 crore
back then.
A year on, the stock trades in the vicinity of Rs 1,900, a 201 per cent surge from its listing day closing price of Rs 632 while
its market cap has swelled to Rs 4,347.66 crore
Usually, these are some of the early signs that multibaggers show.
Shankara Building Products is into organised retailing of home
improvement and building products, and runs a series of stores under the brand name ‘Shankara Buildpro’.
The company has three broad
business units - Retail, Processing and Enterprise
The retail arm provides building products such as TMT steel products, fabrication items, cement, roofing solutions, CP fittings,
sanitaryware, tiles, wooden flooring, electrical, plumbing items and aluminium composite panels
The enterprise business runs a logistics business comprising a fleet of 47 trucks, covering rural, semi-urban and urban belts
The enterprise business currently has the capacity to handle 323,200 tonnes of steel and steel tubes per annum as well as other building
products such as water tanks, tiles, bath fittings and welding electrodes.
Shankara Building Products put up a promising show in March
quarter, which prompted leading brokerages to have a positive outlook for the stock.
The company reported 27 per cent YoY revenue growth for
the quarter ended March 31, 2018 and 10 per cent YoY growth for full year FY17-18
The retail segment recorded revenue growth of 43 per cent YoY for the quarter.
Consolidated PAT growth fell short of brokerage estimates,
growing at 16 per cent YoY to Rs 21.61 crore from Rs 18.59 crore
This was attributed to higher-than-expected tax outgo
Edelweiss Investment Research said the reported PAT of Rs 22 crore was below estimate on account of higher depreciation and interest costs
Shankara is an excellent proxy to play growth in home building as well as the retail spurt in India, it said.
The brokerage has raised
revenue estimates for the company for the next two years, factoring in the strong seasonal growth in this quarter but slightly trimmed
channel and enterprise margins
It has revised its price target for the stock to Rs 2,140 from Rs 2,036 earlier
The brokerage believes solid store addition and acquisitions should drive growth in the coming days
Shankara added five stores during the fourth quarter, taking the total count to 129
For the full year, total store addition stood at 23, which was ahead of its guidance of 15-20 additions.
Shankara’s same-store sales
growth during the quarter was a healthy 41 per cent as the GST impact moderated, demand environment improved, upgraded stores led to
traction, and product categories and depth expanded
The company has guided for nearly 20 per cent growth in same store sales for FY19.
The
retail (50 per cent of sales share) and enterprise segments (31 per cent share) too saw pickup in sales growth
The pickup in retail sales (60 per cent against 49 per cent in Q3) was driven by moderation of GST impact and strong demand from the housing
Enterprise sales benefited from higher enquiries from infrastructure and construction segments.
IIFL has a 'buy' rating on the stock with a
price target of Rs 2,100.
Brokerage Emkay Global says Shankara’s growing presence in organised home improvement and building material
retailing, excellent store operating matrix and high growth opportunity makes it an attractive play.
Despite the sharp stock appreciation,
current valuations appear attractive given strong growth and healthy return on capital employed, it said.
Emkay has an 'accumulate' rating
on the stock with an increased target price to Rs 2,155
That values the retail division at 20 times June 2020 EBITDA.
Shareholding patternShankara Building Products is promoted by Sukumar
Srinivas, Sukumar Srinivas, Parwathi S Mirlay and Dhananjay Mirlay Srinivas, who held 54.79 per cent, 0.44 per cent and 0.26, respectively
at the end of March quarter
Public shareholders owned 43.80 per cent.
Brokerage Kotak Securities appears a little cautious on the stock
Shankara intends to raise Rs 300 crore equity, mainly for further acquisitions, capex, front-end and back-end enhancements and working
capital requirements, which can be an overhang on the stock in the near term, it says
At the current price of Rs 1,868, the stock trades at 35.2 times P/E and 18.8 times EV/EBITDA on FY20 estimates.
“We tweak our estimates
and arrive at a revised price target of Rs 2,017 based on 23 times EV/EBITDA for retail business and 8x EV/EBITDA for channel and enterprise
Owing to limited upside from the current levels, we downgrade the stock to accumulate from Buy earlier,” the brokerage said in a report
