Surya Roshni Q2 Results Review - Profitability Weaker Than Expected; Downgrade To 'Hold': IDBI Capital

IDBI Capital Report

Surya Roshni Ltd.’s Q2 FY24 Ebitda was weaker than expected. Steel pipes segment Ebitda/tonne remained flat YoY, although it recovered 16.3% QoQ to Rs 5,104 led by strong growth in added products (mainly API pipes).

It continued to maintain robust order book of Rs 7.5 billion from oil and gas sector and export. Lighting and consumer durables segment sales were flat YoY to Rs 3,770 million; nevertheless, segment Ebitda increased 9.3% YoY to Rs 350 million.

Lastly, its net debt fell by Rs 1.9 billion in Q2 FY24; Surya Roshni aims to become net debt free by H1 FY25. We lower our FY24 Ebitda estimate by 16% given weaker than expected Q2 FY24 Ebitda and broadly maintain our FY25 forecasts.

Our SOTP-based target price stands at Rs 530. Given the rise in share price, we downgrade the stock to 'Hold' rating.

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