Buy VST Industries; target of Rs 4000: ICICI Direct

ICICI Direct is bullish on VST Industries has recommended buy rating on the stock with a target price of Rs 4000 in its research report dated May 22, 2020.

Broker Research

May 25, 2020 / 21:51 IST

26 Aug, 2025 12:21

Volume

Todays L/H

ICICI Direct's research report on VST Industries

The quarter has seen strong growth of 18.9% in gross sales led by dealer stocking before Budget 2020 and price hike after the budget. The company paid excise duty of Rs 58.2 crore against Rs 22.6 crore in the corresponding quarter, mainly due to a sharp increase in excise duty in Budget 2020. Net of excise duty, sales increased 6.9%. Operating margins expanded 272 bps to 32.5% led by favourable change in product mix towards high priced cigarettes. With higher EBITDA & cut in corporate tax rate, net profit increased 33.2%. Our estimate suggest ~10% volume growth during the quarter with ~9% price hike & product mix change. In the last two years, the company has increased its volume contribution of high priced cigarettes (Rs 5, Rs 6 & Rs 10) to more than 50%. We believe the price gap between the company & leader in low end cigarettes helped former gain market share.

Outlook

Further, the possibility of curbs on illicit cigarettes and expectation of increasing taxation on non-cigarettes tobacco could help drive the volume growth for VST in future. We retain our positive stance on the stock with a target price of Rs 4,000/share and BUY recommendation.