Prabhudas Lilladher: Phoenix Lamps valuations attractive

Prabhudas Lilladher, in a Q1FY07 results update, said the valuations are attractive for Phoenix Lamps, but has not rated the stock.

In a report released on August 1, the brokerage said: "Phoenix Lamps (PLL) delivered Q1FY07 results as expected. Growing 13.9% at the topline, PLL's adjusted PAT at 67.4m (our expectation was Rs 66.3m) was 20.6% higher yoy. Net sales for the quarter stood at Rs 617m. The EBITDA margin slid by 349bp as raw material expenses went up from 51.8% to 53.9% of sales.

"In absolute terms, EBIDTA fell 6.2% to Rs 101m and the lower depreciation (lower by Rs 15m) and higher other income (attributable to exchange gains from exports) helped keep the PBT up by 17.2% to Rs 64.7m. The company's high deferred tax credit makes it net tax negative. The adjusted PAT excludes prior period tax and an extraordinary item related to one-off employee leave encashment.

"On 3rd July 2006, PLL had privately placed 4.17m warrants (one share per warrant) to the affiliate funds of Actis at Rs 102 each, raising the equity to Rs 280.2m. Subsequently, the Mr.B.K. Gupta-led promoters have sold out entirely (their stake of 36.6%) to Actis at Rs 152 a share. As a result Actis has currently made an open offer to acquire an additional 5.6m shares at the same Rs 152 price. On completion of the open offer, Actis is set to become a 66.1% chief promoter of the company.

"Considering the lower depreciation and high raw material cost, we have marginally increased our PAT estimates by 0.5% for FY07 and by 5.7% for FY08 from earlier estimates. At the CMP of Rs 122, the stock trades at 7.2x FY08E EPS of Rs 17.0. We have not rated the company but the valuations appear attractive."

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