Sunday, September 12, 2021

Surya Roshni Ltd ( 500336 ) – Demerging for a Growth

Surya Roshni Ltd ( 500336 )  closes   at 552.55 with  a  Gail   of   +6.0%   on    on    09-September-2021  with formation of  a  Long Green Candle    on Daily  Price Chart.

About the Company :  Surya is the second largest manufacturer of steel pipes (contributes 67% to EBITDA) and also the second largest LED manufacturer in India.

Sector Update :  Positive

Financials : Surya Roshni Ltd  has posted Net Sales / Revenue   of 5554.40Cr & Net Profit 156.50Cr in FY2021 and expected to post Net Sales / Revenue   of 6220.90Cr & Net Profit of 258.80Cr in FY2022 & Net Sales / Revenue   of 6967.40Cr & Net Profit of 342.40 Cr in FY2023  .

ROE will improved from 12% in FY2021 to 19.60% by FY2023. ROCE  will increase from 12.30% to 20.8 %during the same period.

Valuations  : The Company is now Trading at X1.20 of its  valuations of  FY2021 earnings with ~20% Premium and X0.72 of its FY2022 earnings with ~28% Discount and  X0.54 of its FY2023 earnings with ~46%  Discount .

Margin of Safety (1Yr Bond Yield: Value>1 ) is now  1.3   which  makes is attractive . The  Equity Value Per Share ( Enterprise Value Method ) is  552.30

Early Trend: Demerger of its pipes and lighting segment could unlock significant value.

If We factor its FY2023 earnings/valuations, its Price arrives at 1221.60

Disclaimer : We are / may going to take exposure shortly.

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