Advisory Analyst Note

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NARNOLIA FINANCIAL ADVISORS LTD (FORMERLY MICROSEC CAPITAL LTD.); REGISTERED OFFICE ADDRESS: MARBLE ARCH, 2ND FLOOR, OFFICE 201, 236B, A J C BOSE ROAD, KOLKATA- 700020; PHONE NO.-033-40501500; WEBSITE WWW.NARNOLIA.COM. CORRESPONDENCE OFFICE: ARCH WATERFRONT, 5TH FLOOR, BLOCK GP, SALT LAKE, SECTOR 5, KOLKATA-700091; PHONE NO.: 033-40541700; Read More

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AnalystDate	13 May 2019
BSECode	505200
BlogURL	NA
NoteDescription	The company reported lowest margins in last 14 quarters. EBITDA margin declined by 160bps QoQ to 27.4% due to technological cost related to ABS, higher promotional activities, new stores addition and weaker operating leverage. The management expects that the margin improvement will be difficult in FY20 due to slow down in demand in near future and further cost escalation because of BS-VI norms. The demand has been impacted due to dependency in bigger markets (Delhi, Maharashtra and Bengaluru etc.) and also because of Kerala market where the company holds 30% market share and it still have not recovered after floods. Hence the company is opening up new stores in opportunity markets like; UP, Bihar, MP and Jharkhand in order to expand its presence in domestic market. The company’s constant focus on adding new stores, brand building and new product launches have started fetching dividend in terms of increasing export volumes. Factoring the demand concerns, cost increases on account of BS-VI and weaker operating leverage, we reduce our FY20 PAT estimates by 8%. We value EICHERMOT at 24x FY20e EPS and arrive at a target price of Rs.20429 and recommend NEUTRAL rating on the stock
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