JS Research reiterates BUY rating on PABC
JS Research has just released an update on its coverage of PABC stock. The research house has reiterated its Dec 24 target price to Rs. 95 per share.
The key points in the report are:
Reiterating Buy Rating
The research house reiterates a Buy rating for PABC (name of the company), with a target price of Rs. 95 per share, offering a potential upside of 46% from current levels. Despite some adjustments in earnings estimates for CY24E/CY25E due to weaker domestic sales, the outlook remains positive.
Strong Performance in CY23
- PABC witnessed significant growth in CY23, with a 39% YoY increase in revenues and an impressive 86% YoY growth in bottom-line profits.
- Exports played a crucial role, with a 96% YoY increase. Notably, exports to Afghanistan doubled to Rs. 9 billion, and new exports to Bangladesh reached Rs. 1 billion.
Focus on Domestic Market Challenges
- The domestic market faced challenges due to macroeconomic pressures affecting consumer purchasing power, especially in the food and beverages sector.
- PABC responded by diversifying its customer base and improving its local presence by supplying can packaging to cola brands previously only available in PET bottles.
Financial Position and Investments
- PABC holds significant cash and short-term investments of Rs. 8 billion (Rs. 22 per share) as of March 2024, offering a Free cash flow yield of 22% for CY24E.
- The company reduced its long-term debt and invested in fixed-income securities during CY23.
Outlook for CY24 and Beyond
- Despite weaker domestic sales impacting margins in 1QCY24, PABC is optimistic about a recovery in domestic demand as macroeconomic conditions stabilize.
- Discussions are underway with major cola brands for long-term supply agreements, potentially boosting export revenues.
Court Case and Tax Provisions
- PABC continues to pursue a court case regarding tax applicability, with potential implications on taxes paid since CY22 if a favorable decision is reached.
Analyst Recommendation
The research house maintains a positive outlook on PABC, anticipating a recovery in domestic sales and sustained export growth. The stock’s current price offers an attractive investment opportunity with strong upside potential.
| Metric | CY23 Actual (Rs mn) | CY24 Forecast (Rs mn) | CY25 Forecast (Rs mn) |
|---|---|---|---|
| Sales | 19,736 | 22,757 | 29,470 |
| Sales Growth | 39% | 15% | 30% |
| Gross Margins | 40% | 35% | 32% |
| PAT (Profit After Tax) | 5,018 | 5,254 | 6,305 |
| EPS (Earnings Per Share) (Rs) | 13.90 | 14.55 | 17.46 |
| EPS Growth | 86% | 5% | 20% |
| DPS (Dividends Per Share) (Rs) | 3.50 | 7.00 | 7.50 |
| P/E Ratio (x) | 3.60 | 4.48 | 3.74 |
| Dividend Yield (D/Y) | 7% | 11% | 11% |
This table presents financial metrics for the company, including actuals for CY23 and forecasts for CY24 and CY25. Sales, profits, earnings per share (EPS), dividends per share (DPS), and other ratios such as gross margins and P/E ratios are detailed, providing insight into the company’s performance and expected growth trajectory.
Disclosure:
The information in this article is based on research by JS Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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