Linc Pen & Plastics (Linc) is a leading writing instrument company engaged in manufacturing and distribution of pens (ball point & gel), refills and pencils. Linc is also the sole distribution agent of Mitsubishi Pencils (Japan) in India and markets their popular brand Uniball. With rising literacy rates, a high proportion of school-going population, impressive capex in advanced stages of completion and Linc’s focus on moving up the value chain (premiumisation), we expect sales, PAT to grow at a CAGR of 9.5%, 13.5%, respectively, in FY16-19E.
Branded play, quality of earnings to improve: On the back of volume led growth and premiumisation of its product profile, profitability is on an uptrend at Linc. We expect EBITDA to grow at a CAGR of 16.5% in FY16-19E to | 50 crore in FY19E (| 31 crore in FY16). Corresponding improvement in EBITDA margins is expected at 190 bps. Consequent PAT growth is expected at 13.5% in FY16-19E. We have valued Linc at | 300-315, i.e. 1.0x MCap/sales on FY18E-19E sales of | 430-452 crore, respectively
Price Rs. 250
Fair value Rs. 300-315
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