1
May 08, 2018
Visaka Industries Ltd
Materials - Construction Materials
Visaka Industries Ltd
India Research - Stock Broking
BUY
Bloomberg Code: VSKI IN
Recommendation (Rs.)
CMP (as on May 08, 2018) 749
Target Price 900
Previous Target Price 900
Upside (%) 20
Stock Information
Mkt Cap (Rs.mn/US$ mn) 11892 / 177
52-wk High/Low (Rs.) 839 / 327
3M Avg. daily value (Rs. mn)
0.1
Beta (x) 1.5
Sensex/Nifty 35216 / 10718
O/S Shares(mn) 15.9
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 41.3
FIIs 6.3
DIIs 1.2
Others 51.2
Stock Performance (%)
1M 3M 6M 12M
Absolute 8 10 14 124
Relative to Sensex 3 8 8 90
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
For private circulation only. For important information about Karvy’s rating system and other disclosures
refer to the end of this material. Karvy Stock Broking Research is available on Thomson Reuters &
Bloomberg (Code: KRVY<GO>)
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 10049 9606 10123 10960 12145
EBITDA 952 1172 1502 1578 1804
EBITDA Margin (%) 9.5 12.2 14.8 14.4 14.9
Net Prot 244 428 666 685 803
EPS (Rs.) 15.4 26.9 41.9 43.1 50.6
RoE (%) 7.0 10.9 14.9 13.7 14.1
PE (x) 6.9 10.0 15.4 17.4 14.8
Source: Company, Karvy Research; *Represents multiples for FY16 & FY18 are based on historic market price
Earnings Revision (%)
YE Mar FY19E FY20E
Sales (%) 0.0 0.0
EBITDA (%) 0.1 0.3
PAT (%) (0.3) 0.4
Source: Karvy Research
L
L
L
L
Company Update
Analyst Contact
Arvind Vinjamoori
040 - 3321 6275
arvind.vinjamoori@karvy.com
L
L
L
L
90
130
170
210
250
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec
-17
Jan-18
Feb-18
Mar -18
Apr-18
May-18
Visaka Industries Ltd
Sensex
Gaining Traction Across Segments
Set to grow: FY18 full year earnings grew by 55.6% on account of higher revenue
& improved EBITDA margins (263 bps expansion to reach 14.8% due to stable raw
material expenses) vs FY17. Full year revenue witnessed a 5.4% growth owing
to improved volumes across segments. On account of new product launches,
enhanced capacities, brand building eorts & de-risking product mix, we expect
the revenue to grow at 9.5% CAGR during FY18-20E. We re-iterate our “BUY”
rating with a target price of Rs. 900 with an upside potential of 20%.
Cement Asbestos: Asbestos segment contributing around ~ 64% of total revenue
grew at 2% due to high base eect and we are positive about the improving macros
to aid a 4%-5% growth during FY19E & 20E. Current capacity utilizations of ~88%
leave enough room to cater to the further increase in demand.
Boards & Panels: Domestic volumes grew by 14% while exports faced a challenge.
While the revenue from new plant starts contributing to the top line from June 2018
onwards, we are positive about the boards & panels division owing to improved
capacity utilization levels. As per the management, the new plant may operate at
~50-55% utilization levels during FY19E while the existing capacities continue to
operate at above 80% levels. We expect the segment to grow at 13-15%.
Yarn: Full year volumes grew by 8%. Now that GST scenario reaching normalcy,
we expect the segment to grow at 10-12% with healthy margins.
ATUM- Solar roofing: Management does not have a clear view on revenue from
ATUM. We remain positive and believe it to be an upside catalyst in near future.
Enhance capacities & de-risked product mix: Visaka’s expansion project to
increase the bre board capacities by 40% is expected to improve the protability
margins due to reduced transportation costs. The capacity at the new plant can
further be increased to 75K MT from the current 50K MT. While the outlook for
asbestos sheets remains robust, Visaka is planning to increase its non-asbestos
revenue contribution to ~50% levels from the current 33% by FY20E.
Valuation and Risks
At CMP of Rs. 749, Visaka is trading at 14.8x to FY20E EPS. While remaining
positive about the company’s performance, we value the company at 18x (5 year
average of one year forward PE) to FY20E EPS and retain our “BUY” rating with a
target price of Rs. 900 with an upside potential of 20%. Competition from alternate
products along with potential ban on asbestos products may pose threat to the call.
2
May 08, 2018
Visaka Industries Ltd
.
Asbestos sheets continue
to contribute more than
~60% of revenue.
Margins improving on
account of lower raw
material costs & lower
eective tax rates.
Revenue improved owing
to increased volumes.
Exhibit 2: Q4FY18
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ % Q4FY17 YoY %
Turnover 2596 2418 7.3 2543 2.1
Expenditure 2239 2074 7.9 2232 0.3
EBITDA 357 344 3.7 310 15.1
Depreciation 85 87 (2.0) 91 (6.6)
Interest 54 49 11.2 55 (1.0)
PBT 218 209 4.3 164 32.5
Other Income 10 10 (0.6) 8 18.4
Ta x 76 76 (0.4) 69 10.5
PAT 152 143 6.5 104 45.9
EBITDA Margin (%) 13.8 14.2 (48) bps 12.2 155 bps
EBIT Margin (%) 10.5 10.7 (17) bps 8.6 186 bps
Net Prot Margin (%) 5.9 5.9 (5) bps 4.1 176 bps
Source: Company, Karvy Research
Exhibit 3: Segmental Financials
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ % Q4FY17 YoY %
Segment-wise revenues
Building Products 2144 1970 8.8 2394 (10.5)
Yarn 452 449 0.8 408 11.0
Segment-wise EBIT
Building Products 329 298 10.4 313 5.2
Yarn 35 27 28.6 10 256.8
Segment-wise EBIT Margin (%)
Building Products 15.3 15.1 22 bps 13.1 228 bps
Yarn 7.8 6.1 168 bps 2.4 534 bps
Source: Company, Karvy Research
Exhibit 4: Margin Analysis
YE Mar Q4FY18 Q3FY18 QoQ (bps) Q4FY17 YoY (bps)
Material Expenses As % Of Net Sales 46.2 53.5 (733) 43.7 248
Employee Expenses As % Of Net Sales 8.6 9.6 (92) 7.9 76
Other Expenses As % Of Net Sales 29.3 31.3 (197) 27.3 198
EBITDA Margin (%) 13.8 14.2 (48) 12.2 155
Tax Rate (%) 34.8 36.4 (166) 41.7 (692)
Net Prot Margin (%) 5.9 5.9 (5) 4.1 176
Source: Company, Karvy Research
3
May 08, 2018
Visaka Industries Ltd
Exhibit 5: Segment-wise Revenue
Source: Company, Karvy Research
Exhibit 7: QoQ EBITDA & EBITDA Margin
Source: Company, Karvy Research
Exhibit 6: QoQ Revenue Trend
Source: Company, Karvy Research
Exhibit 8: QoQ PAT & PAT Margin
Source: Company, Karvy Research
-50%
-25%
0%
25%
50%
75%
0
1000
2000
3000
4000
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
Revenue (Rs Mn)
QoQ Growth (%)
0%
5%
10%
15%
20%
0
100
200
300
400
500
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
EBITDA (Rs Mn)
EBITDA Margin (%)
0%
2%
4%
6%
8%
0
50
100
150
200
250
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q2FY18
Q3FY18
Q4FY18
PAT (Rs. Mn)
PAT Margin (%)
Building
Products
82.6%
Yarn
17.4%
Exhibit 9: Change in Earnings Estimates
YE Mar - Consolidated (Rs. Mn)
FY19E FY20E
Old New % Change Old New % Change
Net Sales 10960 10960 0.0 12145 12145 0.0
EBITDA 1577 1578 0.1 1799 1804 0.3
EBITDA Margin (%) 14.4 14.4 1 bps 14.8 14.9 4 bps
Adj. PAT 688 685 (0.3) 800 803 0.4
EPS (Rs.) 43.3 43.1 (0.3) 50.4 50.6 0.4
Source: Karvy Research
4
May 08, 2018
Visaka Industries Ltd
Over the last ve years,
Visaka has been trading
at 18x on one year forward
PE basis.
Exhibit 10: Visaka Industries 10 yr PE Band
Source: Bloomberg, Karvy Research
Exhibit 11: S&P BSE Industrial Price Index
Source: Bloomberg, Karvy Research
1000
2000
3000
4000
5000
6000
7000
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb
-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Price (Rs.)
43.9x
38.8x
33.7x
28.6x
23.5x
0
300
600
900
Apr-08
Aug-08
Dec-08
Apr-09
Aug-09
Dec-09
Apr-10
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr
-12
Aug-12
Dec-12
Apr-13
Aug
-13
Dec
-13
Apr-14
Aug-14
Dec-14
Apr-15
Aug-15
Dec-15
Apr-16
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Price (Rs.)
18.4x
13.4x
8.4x
3.4x
5
May 08, 2018
Visaka Industries Ltd
Financials
Exhibit 12: Income Statement
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Revenues 10049 9606 10123 10960 12145
Growth (%) (1.6) (4.4) 5.4 8.3 10.8
Operating Expenses 9096 8434 8622 9382 10341
EBITDA 952 1172 1502 1578 1804
Growth (%) (0.7) 23.0 28.1 5.1 14.3
Depreciation & Amortization 363 341 348 390 429
EBIT 589 831 1153 1188 1375
Interest Expenses 213 196 183 189 189
Other Income 27 57 46 55 49
PBT 404 692 1016 1054 1236
Tax 159 264 351 369 432
Adjusted PAT 244 428 666 685 803
Growth (%) 15.1 75.1 55.6 3.0 17.2
Source: Company, Karvy Research
Exhibit 13: Balance Sheet
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Cash & Equivalents 750 383 229 612 1140
Sundry Debtors 1470 1501 1510 1802 1996
Inventory 2320 1960 2418 2174 2671
Loans & Advances 566 28 8 8 8
Investments 101 0 0 0 0
Gross Block 5843 6507 7507 7707 7907
Net Block 2941 3268 3216 3724 3495
CWIP 41 117 690 57 12
Miscellaneous 0 345 774 769 769
Total Assets 8189 7603 8845 9145 10091
Current Liabilities & Provisions 1502 951 1345 1977 2289
Debt 2995 1829 2110 1932 1892
Other Liabilities 222 898 934 224 224
Total Liabilities 4719 3678 4389 4133 4406
Shareholders Equity 159 159 159 159 159
Reserves & Surplus 3311 3766 4297 4853 5526
Total Networth 3471 3926 4457 5012 5685
Total Networth & Liabilities 8189 7603 8845 9145 10091
Source: Company, Karvy Research
We expect the revenue to
grow at 9.5% CAGR while
EPS to grow at 10% CAGR
during FY18-20E.
Working capital cycle is
improving steadily.
6
May 08, 2018
Visaka Industries Ltd
Exhibit 14: Cash Flow Statement
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
PBT 404 664 1016 1054 1236
Depreciation 363 341 348 390 429
Interest 213 180 183 189 189
Tax Paid (223) (248) (351) (369) (432)
Inc/dec in Net WC 90 479 (435) (121) (379)
Other non cash items 19 44 (46) (55) (49)
Cash ow from operating activities 892 1517 761 1144 1042
Inc/dec in capital expenditure (287) (641) (874) (265) (155)
Inc/dec in investments 3 2 0 0 0
Others 27 57 46 55 49
Cash ow from investing activities (284) (639) (874) (265) (155)
Inc/dec in borrowings (137) 213 271 (178) (40)
Dividend paid (150) (41) (130) (130) (130)
Interest paid (209) (176) (183) (189) (189)
Others 357 (1241) 0 0 0
Cash ow from nancing activities (139) (1246) (42) (497) (359)
Net change in cash 469 (367) (154) 382 528
Source: Company, Karvy Research
Exhibit 15: Key Ratios
YE Mar FY16 FY17 FY18 FY19E FY20E
EBITDA Margin (%) 9.5 12.2 14.8 14.4 14.9
EBIT Margin (%) 5.9 8.7 11.4 10.8 11.3
Net Prot Margin (%) 2.4 4.5 6.6 6.3 6.6
Dividend Payout Ratio (%) 32.5 22.3 16.7 16.2 13.8
Net Debt/Equity (x) 0.88 0.46 0.50 0.50 0.37
RoE (%) 7.0 10.9 14.9 13.7 14.1
RoCE (%) 8.1 13.6 16.7 14.6 15.4
Source: Company, Karvy Research
Exhibit 16: Valuation Parameters
YE Mar FY16 FY17 FY18 FY19E FY20E
EPS (Rs.) 15.4 26.9 41.9 43.1 50.6
DPS (Rs.) 5.0 6.0 7.0 7.0 7.0
BVPS (Rs.) 218.5 247.2 280.6 315.6 358.0
PE (x) 6.9 10.0 15.4 17.4 14.8
P/BV (x) 0.5 1.1 2.3 2.4 2.1
EV/EBITDA (x) 5.0 5.2 8.3 9.1 7.8
EV/Sales (x) 0.5 0.6 1.2 1.3 1.2
Source: Company, Karvy Research; *Represents multiples for FY16 - FY18 are based on historic market price
We expect the operating
cash ow to improve.
Protability & return ratios
to improve owing to lower
expenses.
7
May 08, 2018
Visaka Industries Ltd
Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
Connect & Discuss More at
1800 419 8283 (Toll Free) research@karvy.com Live Chat
f
in
You
Tube
Disclaimer
y Analyst certication: The following analyst(s), Arvind Vinjamoori, who is (are) primarily responsible for this report and whose name(s) is/are mentioned
therein, certify (ies) that the views expressed herein accurately reect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no
part of his (their) compensation was, is or will be directly or indirectly related to the specic recommendation(s) or views contained in this research report.
y Disclaimer: Karvy Stock Broking Limited [KSBL] is registered as a research analyst with SEBI (Registration No INH200003265). KSBL is also a SEBI
registered Stock Broker, Depository Participant, Portfolio Manager and also distributes nancial products. The subsidiaries and group companies including
associates of KSBL provide services as Registrars and Share Transfer Agents, Commodity Broker, Currency and forex broker, merchant banker and
underwriter, Investment Advisory services, insurance repository services, nancial consultancy and advisory services, realty services, data management,
data analytics, market research, solar power, lm distribution and production, proling and related services. Therefore associates of KSBL are likely to have
business relations with most of the companies whose securities are traded on the exchange platform. The information and views presented in this report are
prepared by Karvy Stock Broking Limited and are subject to change without any notice. This report is based on information obtained from public sources , the
respective corporate under coverage and sources believed to be reliable, but no independent verication has been made nor is its accuracy or completeness
guaranteed. The report and information contained herein is strictly condential and meant solely for the selected recipient and may not be altered in any
way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of KSBL. While we would endeavor to update the information herein on a reasonable basis, KSBL is under no obligation to update or keep the information
current. Also, there may be regulatory, compliance or other reasons that may prevent KSBL from doing so. The value and return on investment may vary
because of changes in interest rates, foreign exchange rates or any other reason. This report and information herein is solely for informational purpose and
shall not be used or considered as an oer document or solicitation of oer to buy or sell or subscribe for securities or other nancial instruments. Though
disseminated to all the customers simultaneously, not all customers may receive this report at the same time. KSBL will not treat recipients as customers by
virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or
strategy is suitable or appropriate to your specic circumstances. This material is for personal information and we are not responsible for any loss incurred
based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment
decisions based on their specic investment objectives and nancial position and using such independent advice, as they believe necessary. While acting
upon any information or analysis mentioned in this report, investors may please note that neither KSBL nor any associate companies of KSBL accepts any
liability arising from the use of information and views mentioned in this report. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Past performance is not necessarily a guide to future performance. Forward-looking statements
are not predictions and may be subject to change without notice. Actual results may dier materially from those set forth in projections.
y Associates of KSBL might have managed or co-managed public oering of securities for the subject company or might have been mandated by the subject
company for any other assignment in the past twelve months.
y Associates of KSBL might have received compensation from the subject company mentioned in the report during the period preceding twelve months from
the date of this report for investment banking or merchant banking or brokerage services from the subject company in the past twelve months or for services
rendered as Registrar and Share Transfer Agent, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory
services, insurance repository services, consultancy and advisory services, realty services, data processing, proling and related services or in any other
capacity.
y KSBL encourages independence in research report preparation and strives to minimize conict in preparation of research report.
y Compensation of KSBLs Research Analyst(s) is not based on any specic merchant banking, investment banking or brokerage service transactions.
y KSBL generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a nancial interest in the securities or derivatives of
any companies that the analysts cover.
y KSBL or its associates collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the
last day of the month preceding the publication of the research report.
y KSBL or its analysts did not receive any compensation or other benets from the companies mentioned in the report or third party in connection with
preparation of the research report and have no nancial interest in the subject company mentioned in this report.
y Accordingly, neither KSBL nor Research Analysts have any material conict of interest at the time of publication of this report.
y It is conrmed that KSBL and Research Analysts, primarily responsible for this report and whose name(s) is/ are mentioned therein of this report have not
received any compensation from the subject company mentioned in the report in the preceding twelve months.
y It is conrmed that Arvind Vinjamoori, Research Analyst did not serve as an ocer, director or employee of the companies mentioned in the report.
y KSBL may have issued other reports that are inconsistent with and reach dierent conclusion from the information presented in this report.
y Neither the Research Analysts nor KSBL have been engaged in market making activity for the companies mentioned in the report.
y We submit that no material disciplinary action has been taken on KSBL by any Regulatory Authority impacting Equity Research Analyst activities.
Karvy Stock Broking Limited
Plot No.31, 6th Floor, Karvy Millennium Towers, Financial District, Nanakramguda, Hyderabad, 500 032, India
Tel: 91-40-2331 2454; Fax: 91-40-2331 1968
For More updates & Stock Research, visit www.karvyonline.com