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Alok Industries – Buy from Citi

April 30, 2008

Citi continues to retain a BUY recommendation on Alok Industries. 4QFY08 revenues grew 26% YoY with EBITDA growing 37% YoY on margin increase by 190bps to 24.9%. Recurring net profit excluding forex gain/loss (loss of Rs110m in 4QFY08) increased 24% YoY. For FY08, revenues increased 18% and net profit grew 22%, in-line with estimates.

4QFY08 exports grew 50% YoY to Rs3.9bn. In FY08 total exports grew 60% to Rs10.3bn accounting for 47.5% of total sales compared with 35% in FY07. Share of exports to USA has declined to ~34% in FY08 from ~50% in FY07.

Citi values Alok’s 0.6m sq ft commercial space at Lower Parel and 183-acre textile SEZ at Silvassa at Rs25/share. New projects still to be factored in valuations include: 1) MOU with NTC for redevelopment of 2 mills at Mumbai and Aurangabad; 2) 50% JV for 7 acre commercial project at Nahur in Mumbai; 2) 50% JV for 100-acre integrated township at Vapi; 3) Acquisition of 220 acres at Velugam, Silvassa and 130 acres at Panvel (50% JV) for development of township/SEZ.

Alok Industries is expected to report a fully diluted EPS of Rs 12 for FY09. Citi has set a target price or Rs 121.

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