Please refer to important disclosures at the end of this report
VST Industries Limited is engaged in manufacture of cigarettes containing
tobacco and unmanufactured tobacco. It has witnessed impressive growth in its
topline and bottomline during FY17 on the back of soaring demand for lower
price ranged cigarettes and arrested growth in total expenses. The topline has
grown at 7.4% from Rs.883.1cr in FY16 to Rs.948.2 cr in FY17 while bottomline
has grown at 9.2% from Rs.153.1cr to Rs.167.2cr during the same period. The
growth momentum so set is likely to get further boosted in view of rising
preference for low price ranged cigarettes amongst low income group people
who have so far been consuming beedis till late. Besides, driver to this trend has
been favorable demographics, increase in consumer disposable income,
availability of improved product, innovations etc. The government has kept the
GST rate of 28% and cess of 5% for the below 75 mm category and raised the
specific cess per stick from Rs 1.59 to Rs 2.17 on below 65 mm category, from
Rs 2.12 to Rs 2.84 for regular size category. The change will increase the indirect
tax incidence on the company significantly by 29.0%. The company would need
to take a 20% price hike to pass on the complete burden to the customers. VST is
virtually debt free and financially healthy company. The company has a good
return on equity (ROE) track record: 3 Years ROE 37.23% and has been
maintaining a healthy dividend payout of 45.75%. It has been able to post
continuously hefty cashflows. The company has a RoE 31.1% and is trading at
a valuation P/E of 29.5x of TTM earnings. Hence BUY.
CMP `3194
Reuters Code
BSE Sensex
Face Value (`)
Market Cap (` cr)
52 Week High / Low
Avg. Daily Volume
Vaibhav Agrawal
022 3935 7800 Ext: 6808
vaibhav.agr[email protected]oking.com
VST Industries Ltd
Others | Cigrattes, TobaccoProducts
July 27, 2017
VST Industries | Cigrattes, Tobacco Products
June 5, 2017
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Disclosure of Interest Statement VST Industries
1. Financial interest of research analyst or Angel or his Associate or his relative No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives No
3. Served as an officer, director or employee of the company covered under Research No
4. Broking relationship with company covered under Research No
Ratings (Based on expected returns Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
over 12 months investment period): Reduce (-5% to -15%) Sell (< -15)