Tuesday, August 18, 2009


EBITDA hit on lower revenue

Revenue Halves: Salora International (SIL) reported a sharp 47.4% YoY decline (down 20.7% QoQ) in revenues to Rs1.06bn. This drop was on account of 50.7% YoY slide in its Infocom business and 15.5% YoY decline in the consumer electronics division.

Steep fall in EBITDA margin: With revenues nearly halved YoY, SIL’s EBITDA margin turned negative with a steep 761bp YoY and 64bp QoQ fall to -3.4%. The company reported an EBITDA loss of Rs36mn vs our estimate of Rs20mn profit for the quarter, primarily due to the poor performance in its Infocom business.

Estimates revised; Downgrade to Hold: We have cut revenues by 7.0% for FY10E and by 13% for FY11E. This explains the 28.1% fall in EBITDA and 49.7% in PAT for FY10E. For FY11E, margin is expected to recover on the back of 12.0% recovery in Infocom revenue. At CMP the stock trades at 10.1x FY11E EPS of Rs3.9. We think the stock is fairly valued and do not see much upside from current levels; thus the downgrade to Hold from Buy.

To see full report: SALORA INTERNATIONAL