Flash News Investment - - RECOMMENDATIONS -

We had rec­om­mended Cen­tury Enka in vol­ume no. 33, is­sue no. 37 (dated July 3, 2017) when the scrip was trad­ing at Rs 395. Our rec­om­men­da­tion was backed by fac­tors like its im­proved mar­gins in FY17 and grow­ing de­mand for its prod­ucts from in­dus­tries. In Q1FY18, al­though the com­pany’s rev­enue grew 28.09 per cent to Rs 337.47 crore YoY, the EBITDA mar­gin dipped from 16.7 per cent to 4.1 per cent YoY due to ris­ing raw ma­te­rial prices. The PAT mar­gin too de­clined from 8.5 per cent to 1.8 per cent YoY due to drop­ping op­er­at­ing profits. Due to GST, we ex­pect pres­sure on mar­gins to con­tinue in Q2FY18. Also, the tex­tile in­dus­try is seen to be un­der pres­sure post im­ple­men­ta­tion of GST. Hence, we rec­om­mend in­vestors to EXIT from the scrip.

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