Buy Godrej Industries; target of Rs 240: Nirmal Bang

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Buy Godrej Industries; target of Rs 240: Nirmal Bang

Nirmal Bang is bullish on Godrej Industries and has recommended buy rating on the stock with a target of Rs 240 in its September 27, 2011 research report.

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Nirmal Bang is bullish on Godrej Industries and has recommended buy rating on the stock with a target of Rs 240 in its September 27, 2011 research report.

"Godrej Industries Limited (Godrej Industries) is a diversified Indian conglomerate with business interests ranging from real estate, agri-related, chemicals, retailing to FMCG. Godrej Industries Ltd. was incorporated in the year 1988 as Gujarat-Godrej Innovative Chemical Ltd. Godrej Soaps Ltd was amalgamated with the company with effect from April 1, 1994 and the name was changed to Godrej Soaps Limited. The consumer products division of the company has been de-merged and a new company was formed, namely Godrej Consumer Products Ltd with effect from April 1, 2001. As a part of the scheme of de-merger, the name of the company was changed form Godrej Soaps Limited to Godrej Industries Limited."

"GCPL has an aggressive target of growing net sales 10 times over the next 10 years. This translates into a CAGR of ~26% in net sales for the decade. GCPL expects to grow organically by 15-20% and top it up another 10% inorganically. The company is gearing up to penetrate even villages with 3000 plus population. GCPL ended FY'11 with net sales of Rs.3646 crore. This was also a remarkable year for the company considering seven acquisitions that it pursued during a single financial year. GCPL is still scouting for acquisitions and in the present scenario, wherein the valuations are relatively attractive, also augurs well for the company. The group is equally focused on the real-estate business, through Godrej Properties. The company contributed close to 10% of the group's turnover in FY'11. The contribution in terms of bottomline was not significant. However, the group expects significant contribution to the group's bottomline to come from Godrej Properties over the next 5 to 7 years. In the property business, the company follows a joint venture model unlike the land bank acquisition model (which is prune to risks), where it enters into joint ventures with the land owner. In consideration for the same, they either share revenues or the developed area. This makes the model capital light and de-risked."

"The company has got significant value in the books. Against the present market-cap of the company at Rs.6098 crore, the market value of it's holding comes to Rs.6103.5 crore (without applying any holding company discount).  Considering the growth in various unlisted businesses, we expect value unlocking in future also. This should provide further impetus to the valuations. Considering the diversified business model, focused management, superior corporate governance, we expect the share price to do relatively well compared to the broader markets. We recommend a "BUY" on the stock with a target price of Rs 240, providing an upside of 26% over the next 6 to 9 months," says Nirmal Bang research report.

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To read the full report click on the attachment