Nandan Denim - IC - At inflection point-All set to gain from operating leverage, Buy, TP Rs 219
At the current price of ₹126, Nandan Denim is trading at 8.0x FY17E and 6.1X FY18E Earnings, while in terms of EV/EBITDA it is quoting at 5.2x FY17E and 4.3x FY18 EBITDA respectively. Valuation looks attractive compared to peers like Arvind, Indo Count, Vardhman Textiles and Trident Ltd when compared on parameters like PAT CAGR, ROE and Dividend yield. Post completion of Capex by Q3FY17, Nadan should be able to do ROE of above 20% in a sustained manner and hence we believe 6x FY18E EBITDA is a fair value for the company, which gives us fair value of company's Equity at ₹219. At the fair value of ₹219, stock is valued at 13.9xFY17E PE and 10.6xFY18E PE and offers upside potential of 74%.
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