Anand Rathi
NCL Ind (Buy)
CMP: ₹131.25
Target: ₹185
In Q2, the company replaced its 15 per cent NCDs with a 10 per cent term loan. This would help reduce interest costs in coming quarters. Management said the MDF door capacity would be commissioned by end-FY19. With no major capex, we expect net D/E to shrink to 0.3x in FY20 (from 0.5x in FY18). Higher depreciation on the commissioning of the new plant and the subdued operating performance would result in PAT registering only a 17 per cent CAGR over FY18-20.
Valuation: We retain our Buy rating, at a target ₹185 on 6.5x FY20e EV/EBITDA.
Risks: Rise in input costs, demand slowdown.