Valuation Method and Risk Statement

研报英文原文证据摘录

Valuation Method and Risk Statement

We derive our price targets for mid-caps using DCF, target earnings multiples or average PE

and EV/EBITDA multiple methodologies.

We believe the risks to our long-term estimates (eg, for corporate earnings) and

macroeconomic variables (such as GDP growth rates and inflation) are an economic

slowdown, weakening currency, global economic events and government policy changes.

Astral: We use target PE multiple methodology to value Astral.

Key downside risks for the sector include: 1) Lower than anticipated recovery in demand from

the construction segment leading to lower volume growth for pipe manufacturers and 2)

further drop in PVC prices impacting realizations and margins for pipe manufacturers.

Key downside risks for the company include: 1) increased competition in the segments that it

operates in especially pipes and paints, 2) lower than expected margin expansion in CPVC

pipes through backward integration and 3) Increased investments in paints & adhesives

dragging overall company level margin and return profile.

Supreme: We use target PE multiple methodology to value Supreme.

Key downside risks for the sector include: 1) a slower-than-anticipated recovery in demand

from the construction segment leading to lower volume growth for pipe manufacturers; and

2) a further drop in PVC prices impacting realisations and margins for pipe manufacturers.

operates in, especially pipes; 2) lower-than-expected margin expansion in PVC pipes; and 3)

under-utilisation of capacities weighing on the company's overall margin and return profile.

Key upside risks for the company include: 1) higher-than-expected utilization despite capacity

ramping up, supported by overall industry demand; 2) sustained demand in the HDPE