Buy Visaka Industries; target of Rs 166: Angel

Angel Broking's report on Visaka Industries

"For 3QFY2015, Visaka Industries (VIL)’ results have come in lower than estimated on all parameters. The company’s top-line for the quarter grew by 13.9% yoy to Rs 214cr, marginally lower than our estimate of Rs 218cr. The EBIDTA and EBIDTA margins increased by 209.9% and 456bp yoy respectively, to Rs 15cr and 7.2%. However, the same were lower than our estimates of Rs 17cr and 7.9%, due to a higher other expense. The company reported a net profit of Rs 0.3cr against a loss of Rs 4.7cr in 3QFY2014; however the same was lower than our estimates of Rs 1.7cr."

"In the last 2-3 months, a positive set of macro data (GDP, IIP, Inflation and Policy rates) was released coupled with positive upwards revision of those data for FY2016E and 2017E by the IMF and the World Bank. This augurs well with our assumption of demand from housing and infrastructure sector picking up, resulting in higher utilization levels for its asbestos cement product business coupled with strong growth momentum in its V-boards segment. Further, in FY2016E, the depreciation cost is expected to decline by ~30% yoy, which will significantly boost earnings."

Outlook and Valuations: "We have marginally revised our estimates downwards for FY2016E to factor in the lower than estimated numbers. At the current market price of Rs 114, the stock is trading at a valuation of 4.8x FY2016E EPS, which continues to be attractive. We continue to maintain our Buy rating on the stock, with a revised target price of Rs 166, valuing the stock at 7x on FY2016E earnings", says Angel Broking research report.

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