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Visaka Industries Ltd Research Report - 21st Jan 2016

Miscellaneous | Published on Nov 18th 2015


For 2QFY2016, Visaka Industries reported a mixed set of numbers. The top-line, at Rs192cr (8.2% yoy decline), was marginally below our estimate of Rs205cr. The EBITDA declined by 21.6% yoy to Rs15cr and the EBITDA margin contracted by 135bp yoy to 7.9%, owing to a 109bp yoy increase in raw material cost as a percentage of sales to 50.2% and 157bp yoy increase in employee expense to 8.0% of sales. Other expenses declined by 131bp yoy to 33.9% of sales. We had built in an EBITDA margin estimate of 6.4%. Interest expense at Rs5cr was higher by 19.7% on a yoy basis. Consequently, the net profit declined by 78.9% yoy to Rs0.8cr, against our estimate of Rs1.5cr. Near term pressure for Asbestos Cement Products (ACP); Overall long term prospects intact: The ACP division of the Building Products segment is likely to face pressure in the near term on account of subdued rural sentiment. However, the company is a major player with ~17% market share. With the rural economy expected to improve in the longer run, we expect the division to perform well going forward. The Building products segment is also supported by strong performance of its V-boards division which is expected to post a robust performance on account of growing acceptance and cost advantages against substitute products and increasing contribution of exports. Additionally, we expect the Synthetic yarn segment to remain a steady contributor, thus aiding top-line growth. Outlook and Valuations: We have marginally revised our estimates downwards for FY2017E to factor in the lower than estimated numbers. At the current market price of Rs119, the stock is trading at a valuation of 4.1x FY2016E EPS, which continues to be attractive. We continue to maintain our Buy rating on the stock, with a revised target price of Rs144, valuing the stock at 5.0x on FY2017E earnings.

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CMP 119
Target Price 144
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others55.0
Grand Total100.0

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