Hold IFB Industries; target of Rs 1165: Centrum Research

Centrum Research's research report on IFB Industries

We maintain our Hold rating on IFB Industries with a revised TP of Rs1165 (30x FY20E EPS). We believe the positive of new models/launches in washing machine category, strong distribution led volume growth coupled with margin expansion is factored in the valuations and offer limited upside. Further more than 30% of the operating profit is from engineering division which would command lower valuation given its high capex and lower return ratios. However we believe the positives of entry in the refrigerator category is yet to be factored in our estimates as we remain conservative given the product failure 3 years back. Price hike in June’18 on the back of Rupee depreciation and RM cost inflation gives us comfort on sustenance of gross margins.

Outlook

We have marginally increased our revenues by 1.4%/3.1% for FY19E/FY20E on higher volumes in washing machine while operating profit has been increased by 1.3%/2.2% over same period on topline growth. PAT is increased by 1.7%/1.9%. We maintain our Hold rating on the stock with a revised TP of Rs1165 (30x FY20E EPS). Key downside risk would be depreciation of Rupee and higher RM cost.