Buy VST Industries; target of Rs 3750: ICICI Direct

ICICI Direct’s research report on VST Industries
VST  industries would be the bigger beneficiary of the change in  the indirect tax structure. With the abolition of excise duty and additional excise duty, net tax incidence for VST industries would come down by 8.3% and to comply with the anti profiteering clause, the company would require  taking  price  cut  by  6.0%.  State  VAT  has  been  replaced  by  GST and  cess  would  replace  specific  excise  duty.

Outlook

We  expect VST to clock revenue CAGR  of  14.5%  FY17-19E  led  by  volume CAGR of 5.5% after witnessing volume decline for five  consecutive years. Led by healthy revenue growth and EBITDA  margin  expansion of  510 bps, profit  for  the company is estimated to grow at a CAGR of 23.3% over the same period. Hence,we are upgrading our recommendation on the stock to Buy with a revised target price of| 4130/share valuing it at 25x on its FY19E EPS of | 164.6.

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