ICICIdirect has recommended 'Buy' on Butterfly Gandhimathi with target price of Rs 355 in its report.
Commenting on the investment rationalale, ICICIdirect said ,''Butterfly Gandhimathi Appliances (BGAL) Q1FY15 revenues declined 48.3% YoY to Rs 1070 million due to absence of government sales. Owing to a weaker topline and high fixed costs, PAT dipped from Rs 89 million in Q1FY14 to Rs 2 million in Q1FY15.
Despite a relatively weak Q1FY15, we have maintained our revenue and operating margin estimates for FY15E and FY16E. However, considering that fixed costs came in higher than our expectations, we have lowered our PAT estimates for FY15E/FY16E by 29.6%/4.4%, respectively.
BGAL is trading at a discount to its peers (TTK Prestige and Hawkins Cookers). We believe the company is a re-rating candidate considering the strong turnaround that it has made and also the growth potential it has. Our earnings estimates have been revised downwards owing to higher fixed costs. However, we remain positive about the long-term prospects of the company. The company's expansion in non-south regions is also picking up well and the acquisition of the LLM product portfolio would further boost revenues. We maintain BUY on Butterfly Gandhimathi with a revised target prices of Rs 355 based on 14.0x FY16E EPS of Rs 25.5."
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