CRISIL retains valuation grade of 4/5 to Visaka Industries

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CRISIL retains valuation grade of 4/5 to Visaka Industries

CRISIL Research has come out with its report on Visaka Industries. The research firm has initiated coverage on the company with a fundamental grade of 3/5 and maintained the fair value of Rs 118 per share, in its August 04, 2011 report.

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Visaka Ind BSE | NSE 30/05/12 Are Mutual Funds betting on Visaka Ind?

CRISIL Research has come out with its report on Visaka Industries . The research firm has initiated coverage on the company with a fundamental grade of 3/5 and maintained the fair value of Rs 118 per share, in its August 04, 2011 report.

Visaka Industries Ltd's (Visaka's) Q1FY12 earnings beat CRISIL Research's expectations driven by better q-o-q EBITDA margins. Revenues were in line with our estimates - up 12% y-o-y - mainly led by healthy volumes in the building products segment. However, the synthetic yarn segment de-grew due to lower volumes. The 24% y-o-y de-growth in PAT was anticipated in view of the pressure on asbestos cement sheets (ACS) realisations owing to competition from galvanised iron sheets and colour coated sheets. While ACS realisations showed an improvement from Q4FY11, they were lower than a year ago. The 10% rise in cement prices during Q1 added to pressure on margins. We remain positive on Visaka's growth prospects based on its dominant position as the second largest player in the ACS industry and its focus on rural India. We maintain our estimates and the fundamental grade of 3/5.

Q1FY12 result analysis
• Revenues grew 12% y-o-y (16% q-o-q) to Rs 2,106 mn due to 17% volume growth in ACS plus growth in boards and panels. However, the synthetic yarn segment de-grew 9% y-o-y due to a 30% drop in volumes despite better realisations.

• EBITDA margin contracted ~550 bps y-o-y (up ~250 bps q-o-q) to 13.9%. EBIT margin for the building products segment declined 510 bps y-o-y to 14.4% due to lower ACS realisations. EBIT margin for the synthetic yarn segment declined 630 bps y-o-y to 12.7%.

• PAT decreased by 24% y-o-y (up 56% q-o-q) to Rs 157 mn. PAT margin fell 359 bps y-o-y (up 190 bps q-o-q) to 7.5%.

Key developments: Sambalpur plant commissioning by September
Visaka's ACS plant at Sambalpur, Orissa will be commissioned by this September, i.e. a delay of two months. The commissioning of the plant will pave the way for Visaka's entry into the eastern markets, which offer higher realisations.

Valuations: Current market price has upside
We continue to use the discounted cash flow method to value Visaka and maintain the fair value of Rs 118 per share. At the current market price of Rs 97, we retain the valuation grade of 4/5, says CRISIL Research report.

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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