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Multi Baggers

Aashish Tater

Aashish Tater

5.30 AM Jan 1st 1970

Visaka Ind

BSE ID : 509055     NSE ID : VISAKAIND

RECOMMENDED PRICE 101.40

PEAK FROM RECO 174.71 72.30%

CURRENT PRICE 108.15 Resource id #18

Visaka Industries is the second largest cement sheet manufacturer in India and manufactures corrugated cement fiber sheets. Buy and hold the stock keep accumulating the dividend and interim dividends if any declared by the company and book your cost at Rs 168 and ride rest for Rs 220-240 zone.

Visaka Industries

The Next sector to outperform as they say "Acchay Din Aane Wale Hain" for the sector.

Missed Jindal Poly and Poly-Films don't miss the next big bet which is the Cement Sheet Makers.

Asbestos Sheet Maker is uniquely poised for one of the best year in last 6 years. We expect huge demand upswing and margin expansion. Our base level research believes the capacity demand mismatch is going to create huge margin expansion for asbestos sheet maker.

Key triggers: Only 4-5 players having deep pocket survived last year turmoil and many of the other players either leased the production set up or shut down or have done nothing in terms of expansion. The idle capacity in industries remain fully utilized and we believe the entire sector is going to see the period of 2010-2011 where they were seeing record PAT and Sales highest ever in their business cycle.
 
About the company

Visaka Industries manufactures corrugated cement fiber sheets. The company is the second largest cement sheet manufacturer in India. Visaka has installed 8 factories spread across the country, producing about 750,000 tons of corrugated cement sheets per year. The company diversified into textile yarn manufacturing in 1992. Visaka's airjet spinning technology plant established in Nagpur. The spinning plant, with 31 MURATA Twinjet spinning machines and 112 Two-For-One twisting machines, is the world's largest installation of its kind, producing about 9,000 tons of yarns per annum.

The fibre-cement board & panel division was established in the year 2009 to cater to the needs of modern construction designs. The first factory was established in Miryalaguda, Andhra Pradesh and the second factory was established in the year 2013 in Daund, Maharashtra. This division has a capacity of 100,000 tonnes of fiber cement sheets per annum. This division also produces innovative dry-wall panels.

Visaka Industries Limted: Insulated from Commodity Risk as stable business coming from Textile Diversification

Key Triggers:

In 2010 company had sales of 600 crore it reported PAT of 57 crore and EPS of 36 per share. The company used to pay dividend of 6 rs except for current year where it paid 2.5 pay out being highest in the sector compared to PAT.

Some fundamental shifts have happened in the company one of them being from 2010 to 2014 one of the most noticeable development is the top-line growth of 40-50%. We roughly worked out the golden period of asbestos sheet company has just begun. Due to formation of 29th State Telangana there is a genuine rise in demand for the sector and entire sector is going to see robust demand coupled with high profitability. Even the cost of input materials (Cement) is being passed on to customers. Our dealer level checks make us believe the rapid spurt in price is going to impact bottomline significantly. We expect EPS of close to 48 for this year for Visaka Industries that will result in dividend of 7 to 8 Rs. for this year.

This is going to create a dividend yield of 8% and one can easily extrapolate the same for next year where a dividend we expect could be of 9-10 Rs per share. This is an interesting opportunity where Sales and Profitability is expected to rise 25% than 2010( previous highest pat) and we are pegging target of close to 168 translating it into a PE(forward) est of 3.5x which can expand to 5-6 times due to momentum and transitional shift on the sector.

The strategy is simple buy and hold the stock keep accumulating the dividend and interim dividends if any declared by the company and book your cost at 168 and ride rest for 220-240 zone which will create the same technical snag it had created 2 years before as projected by our estimates.

As we say "Acche Din aane walen hai" another sector which is having tremendous potential and is available at dirt cheap prices given the current market scenario we will not be surprised for this large swing and expansion before the sector tops out and give correction.

Interestingly almost all its peers are re-rated significantly from lows right from Everest Industries to Hyderabad Industries this is one stock which is having valuation gap in terms of PE and dividend yield on forward estimate basis.

Risks are always associated with stocks, one of the most important risk here is fund managers do not pick this sector and thus constant valuation expansion is not happening. Also few companies are insulated as they have used their reserves for diversification or creating a holding structure for their promoters. Thus demand supply mismatch always go in disequilibrium. The best way to trade cyclical is enter at the bottom or near bottom and exit before peak.

Disclaimer: Aashish Tater is an equity analyst and investment adviser based in Kolkata, INDIA. At the time of writing this article, he, his firm and dependent family members have no position in the stocks mentioned above. The author invites readers to send him email and welcomes comments, feedback & queries at query@fortunewizard.com. This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.

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