In the past one week, the stock has underperformed the market by falling 17%, as compared to 1% rise in the S&P BSE Sensex. It has tanked 64% from its record high level of Rs 2,365 touched on December 5, 2017 on the BSE.
Q2 RESULTS DISAPPOINT
Shankara Building posted 47% year on year (y-o-y) declined in its net profit at Rs 91 million in Q2FY19, due to higher operational cost. Total income grew 12.6% at Rs 5,716 million on y-o-y basis.
Floods and heavy rains, especially in Kerala & South Karnataka, have impacted performance. Kerala revenues were down 40% q-o-q and 15% y-o-y, the company said.
Ebitda (earnings before interest, tax, depreciation and amortization) margin was down 240 bps to 4.8% from 7.2% in year ago quarter. The margin contraction was on account of increase in raw material costs and a sharp drop in channel & enterprise division EBIT margins.
Going ahead, Shankara is planning to focus more on new product category products by offering better pricing to its customers. This could keep margins under pressure in the near-term.
Analysts at ICICI Securities expect topline growth at 15.7% (CAGR) to Rs 34 billion in FY18-20E. However, with margin pressure and the management commentary on significant improvement over the next few quarters, the brokerage firm lowered EBITDA margin assumption, resulting in sharp earnings downgrades.
“We now expect its earnings to grow at a subdued pace of 5.2% CAGR to Rs 817 million in FY18-20E. Hence, we have a HOLD recommendation on the stock,” the brokerage firm said in result update.