Visaka Industries (VIL) is engaged in two businesses – building products (cement
asbestos products and fibre cement flat products like V-boards and V-panels) and
synthetic yarn. It has an installed capacity of 7,52,000MT of cement asbestos
products with a strong network of 6000 plus stockists / dealers across India. In the
synthetic yarn segment it has an installed capacity of 31 MTS M/CS. With
consumer and business confidence improving in building products segment and
sustainable performance of its synthetic yarn segment, we expect the company to
post a strong performance going ahead. The companys
depreciation cost is expected to increase sharply in FY2015 due to changes made
in the Companys Act 2013 which lays down the new rates for depreciation of
fixed assets. However, in FY2016E, the depreciation cost is expected to decline by
~30% yoy which will significantly boost profits. We expect the net profit to grow at
a CAGR of 81% over FY2014-16E to Rs39cr. At the current price of Rs123, the stock
is trading at a valuation of 5x FY2016E EPS, which we believe is attractive. We
initiate coverage on VIL with a Buy rating and a target price of Rs174, valuing the
stock at 7x on FY2016E earnings.

Download Full Report View Full Report in Browser