Prefer IFB Industries: Ashish Chugh

Ashish Chugh, Investment Analyst told CNBC-TV18, "IFB Industries is the company which manufactures the famous IFB brand of washing machines. This company has got two divisions. One is appliances division and the engineering business division. Appliances business division makes washing machine, dishwashers, microwave ovens and other kitchen products and engineering division mainly caters to the auto ancillary segment.”

“This company has been introducing a number of new products. The company which used to be primarily a washing machine company has transformed itself into a complete appliance company,” he added. “If you look at the financials of the company FY13 sales were about Rs 900 crore and profit after tax was about Rs 30 crore. First half even though sales have been up by about 8 percent to Rs 460 crore, profit after tax is down by about 75 percent to about Rs 3.5 crore, this is mainly on account of higher cost and also the expense involved in introduction of new products.” “I liked the stock at Rs 60 mainly because of the valuations at which the company is trading. The market cap of the company at the current price is about Rs 245 crore. It is a debt free company. It has got a very small suppliers’ credit of about Rs 8-9 crore.” “This company is holding cash and liquid investments of close to Rs 100 crore, so you are virtually getting this company at an enterprise value of Rs 150 crore. An enterprise value of Rs 150 crore for a company which does revenues of about Rs 1,000 crore, profitability definitely is low as of today, but I think as the economy improves, the profitability will also improve and for a company with such a vast distribution network and such a good visible brand available at Rs 150 crore, the stocks looks really cheap at the current valuations.” Disclosure: He and his family may have investments in IFB Industries.