research :: company :: visaka industries ltd

8/14/2019 Research :: Company :: Visaka Industries Ltd

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RESEARCH :: COMPANY :: VISAKA INDUSTRIES LTD

13

th

February 2010

BUY

Approx price = Rs 122/-

Target price = Rs 180+

Estimated EPS (FY10E) = Rs 35- 38

Projected PE (FY10E) = 5-6

Investment period =12 mnths

STOCK INFO (TTM Basis)

Sector : Cement products

Market cap : 201.20 crores

Equity Capital : 15.92 cr

Face value : Rs 10.00

Book value : Rs 118

EPS (FY09) : Rs 31.93

Cash EPS : 45

Dividend : 40%

Sales Growth : 13%

RONW : 27%52 week H/L : 158.90/120.05

Avg Daily Vol : (2 Wk avg)

Sensex : 15922

BSE code : 509055

Promoter

Shareholding : 42.28%

Management : Mr. G. Vivekanand

Incorporation : Year 1981

Listed : NSE/BSE

FIIs/MF Holding :3.68% / 4.18%

Prepared By:-Shashi Srivastava

Research Associate

[email protected]

Reviewed By:-

Prakash Pandey

AVP- Portfolio management

[email protected]

COMPANY PROFILE

Visaka IndustriesLimited (VIL), established in 1981, is the second largest cement

manufacturer in India with the total installed capacity of 6,30,000 tonnes. VIL is well diver

company engaged in the manufacture of fibre cement products and synthetic blended

Company has pan india presence with 6 manufacturing plant for asbestos making plants an

manufactring plant for garments.

FUTURE OUTLOOK:-

At the current price of Rs 122, the stock is available at 5.54x of its FY09 earnings, 4.1

its FY10E earnings and 2.79x of its FY11E earnings.

Particulars(Rs cr) FY09 FY10E* FY11E*

Net Sales 580.65 666.32 786.26

Other Income 4.73 5.1 7

Total Income 585.38 671.42 793.26

Expenditure 496.32 550.45 642

PBIDT 89.06 120.97 151.26

Interest 17.02 12 14

Depreciation 16.6 19 18.5

PBT 55.44 89.97 118.76

Tax 19.49 33.29 41.57

PAT 35.95 56.68 77.19

EPS 22.63 35.60 48.49

CEPS 33.01 47.54 60.11

OPM (%) 15.34% 18.15% 19.24%

NPM (%) 6.19% 8.51% 9.82%

* estimated

VILS BUSINESS DIVISION:-

Asbestos Cement Business:-

Visaka's high-tech Fibre Cement plant is a fully automated factory incorporated the

sophisticated technology. This division is engaged in the manufacture and sale of asbe

products in India. The Cement Asbestos segment produces asbestos sheets and access

used primarily for as roofing material.
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Buy- Visaka Industries L

Reinforced building boards (RBB):-

Visaka industries commenced the commercial production in Reinforced Building Boards divison on 1st

May 2008. This unit is

situated in Miryalguda Taluq, Nalgonda District, in the state of Andhra Pradesh. The product from this unit has been brandedas V-Board and is obtaining continuing market acceptance.Company received its first export order for 300 tones of V Board

valued at Rs 37 lakh from Middle East and part of consignment was exported on 10 July 2009.

In FY 2009, the total production and sales(Qty) was 12760 MTs and 10019 MTs respectively. The turnover from this division

was Rs 30 crores, however this division posted loss of Rs 5.92 crores.

Synthetic Yarn business:-

Synthetic yarn business is engaged in the manufacturing of yarn using state-of-the-art Twin Air Jet Spinning technology from Mura

Japan, with 28 MTS machines equivalent to 60,000 spindlesVisaka has earned recognition as the largest Unit in the world with MT

installation. As of now company produces 10000 MT of yarn per year and export around 4000 tonnes across the world. In FY 2009, t

total production and sales(Qty) was 8741 MTs and 9283 MTs respectively. The turnover from this division was Rs 117.35 crores

PRODUCT MIX OF FY 2009 Vs FY 2008:

2009 2008

PRODUCTSProduction(MT)

Sales(MT)

Salesvalue(cr.)

Production(MT)

Sales(MT)

Salesvalue(cr.)

Y-o-Y %increasein sales

AsbestoscementBusiness

550438 584892 479.57 597006 550478 356.96 34%

ReinforcedBuilding

Boards

12760 10019 9.30 - - - -

SyntheticYarn

8741 9283 117.35 7917 7564 98.75 19%

EXPANSION AND GROWTH:-

Company has commenced the commercial production of V-Panel unit from January 01, 2010. V-Panel is another revolutionabuilding product, which is being manufactured with technical collaboration from M/s Dantotech of Australia. With the installecapacity of 12,500 tonnes, this unit will utilize at least 8% - 10% of RBB production.

Company is expecting the expansion work at its asbestos cement sheets unit at pune for increaing the capacity from 72000 tonneto 1 lac tonnes, to be completed by april 2010.

Company is setting up plant at Sambalpur , Orissa for manufacturing Fibre cement sheets, with a proposed capacity of abou2,18,000 tonnes.

VIL is foraying into Coal- based power.The 1050 MW power project at an estimated cost of Rs 5000 crores shall come up iOrissa. For this purpose Visaka Thermal Power Ltd, a special purpose vehicle (SPV) has been set up. About 30% of the projecost shall be funded by way of equity and the balance shall be raised by way of debt. The project implementation shall be spreaover a period of 9 years in 3 stages of 350 MW each.


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RESULT ANALYSIS:

QUATERLY TTM

Particulars 31-Dec-09 31-Dec-08 Var% YOY12 mnths

Ended dec0912 mnths

Ended dec08Var% YOY

Net Sales 125.05 121.27 3% 596.34 527.52 13%

Other Income 0.7 1.92 -64% 3.57 5.43 -34%

Total Income 125.75 123.18 2% 599.91 532.95 13%

Less: Expenditure -106.97 -104.69 2% 489.89 449.66 9%

PBIDT 18.78 18.49 2% 110.02 83.29 32%

Less: Interest -2.93 -4.58 -36% 12.39 16.87 -27%

Less: Depreciation -4.01 -4.02 0% 97.63 66.42 47%

PBT 11.84 9.9 20% 21.67 16.49 31%

Less: Tax -4.06 -3.65 11% 75.96 49.93 52%

Net Profit 7.78 6.25 24% 25.26 18.26 38%

During the quarter ended on 31st

Dec, 2009 the Net Profit of the company reported an increment of 24% on y-o-y basis to Rs 7.7

crores as against Rs 6.25 cr during the corresponding quarter last year. The operating profit for quarter increased by meager 2% to R

18.78 cr against Rs18.49 cr as raw material consumption and distribution expenses increased by 14% and 19% respectively on y-o

basis in Q3FY10. After providing for interest, the company generated cash before depreciation Rs. 15.84 Crore in Q3FY10.

On TTM basis, Net Sales and PAT rose by 13% and 38% on y-o-y basis to Rs 596 cr and Rs 18 cr ,respectively, as against th

corresponding period last year.The current price of Rs 122 discounts the company's Q3 December 2009 annualized EPS of Rs 31.93

by a PE multiple of 3.83.

INDIAN CEMENT PRODUCT INDUSTRY

The cement products manufacturers, manufactures value-added utility building products like Fibre Cement Sheets, Autoclaved Aerate

Cement Blocks, Aerocon Panels and Fibre Cement Boards. There are 17 major players in this industry with about 63 manufacturing un

Everest industries, Hyderabad industries, Ramco industries and Visaka industries are the major domestic players. The efficiency of th

companies in this sector is apprehended by the ability of the firm to source inputs at reasonable cost as well as the scale of operation

The cement product industry especially the asbestos cement manufacturers celebrates thrust given by the government on rura

infrastructure especially on rural housing through Indira Awaas Yojana which is a positive indicator because cement product sect

derives sizeable portion of demand from rural housing sector and rest from industrial sheds. So the players with strong focus on rura

segment like, Everest industries and strong brand s are better placed. Post monsoon the demand in northern market may continue to b

strong driven mainly by the common wealth game related development activity. Union Budget 2009-10 has increased the excise du

incidence on cement products from 4% to 8%. But with speedy implementation of infrastructure and development projects, it will helCement and Cement Product sectors industry to sustain its strong demand.Cement is the major input used by the industry especialthe asbestos cement manufacturers. According to CMIE (Center For Monitoring Indian Economy) cement prices are expected

weaken in second half of 2009-10 as 35 million tonnes of fresh cement capacity will come on stream, which will put pressure o

realizations of company. A total addition of 270,000 MT in the sheeting industry during the year along with 4.5% growth rate in sheetin

industry has put pressure on pricing and sales volume.

Chrysotile asbestos, which is one of the major raw material used in cement product industry, is majorly imported from chin

and brazil, so depreciated Indian rupee will hit industry margins.


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Value of Import of Chrysolite asbestos:-

Commodity 2007-2008 2008-2009 %Growth

ASBESTOS IN THE FORM CHRYSOTILE

India's Total Import (Rs Lacs) 251,654.01 303,696.31 20.68

Source: Department of commerce, Govt of India

PEER COMPARISON ON TTM BASIS:

Particulars Visaka Inds. Ltd Hyderabad Inds. Ltd Everest Inds. Ltd Ramco Inds. L

Equity 15.88 7.47 14.8 8.

Market Cap 215.97 458.98 249.45 548.

Sales 593.02 680.99 611.84 441.

PBIDT 106.45 134.07 47.83 93

Net Profit 51.86 71.91 23.09 39.

PBIDTM (%) 18% 20% 8% 14

PATM (%) 9% 11% 4% 9

EPS 32.66 96.36 15.6 4.

P/E 4.16 6.18 10.8 13.

EV/ Sales 0.57 0.79 0.66 1

EV/PBIDT 3.19 4.1 8.39 8.

Dividend Yield 3.28 1.74 1.6 2.

Visaka industries limited being a leading company in cement products industry with total installed capacity of 6,30,000 MT and mark

share of more than 15%. At CMP of 122 with PE of 4.16 and decent dividend yield of 3.28 makes visaka industries a good buy f

long term.

BALANCE SHEET: VISAKA INDUSTRIES LTD (Rs cr)

2009 2008 2007 2006 200

NETWORTH187.79 159.29 155.94 87.83 72.5

LOANS- TERM90.94 113.4 139.09 114.9 87.2

LOANS-WORKING CAPITAL 77.81 84.65 47.08 36 17.6DEFERRED TAX LIABILITY

11.25 9.64 10.26 7.86 6.2

TOTAL 367.79 366.98 352.37 246.59 183.7

NET BLOCK INCLUDING WP208.76 209.5 189.71 155.97 119.8

INVESTMENTS2.22 0 1.25 0.01 0.0

NET WORKING CAPITAL156.81 157.48 161.41 90.61 63.8

DEFERRED REVENUE EXPENSES0 0 0 0 0.0

TOTAL 367.79 366.98 352.37 246.59 183.7


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PAST FIVE YEARS PERFORMANCE (Rs cr)

PARTICULARS 2008-09 2007-08 2006-07 2005-06 2004-05

Net Sales580.65 433.13 379.2 295.76 208.59

Other Income4.73 6.45 5.16 3.86 2.7

Total Income585.38 439.58 384.36 299.61 211.3

Expenditure-496.33 -395.02 -324.72 -249.47 -175

Interest-17.02 -15.72 -11.5 -10.45 -6.66

Profit Before Tax and Depreciation72.03 28.85 48.14 39.69 29.65

Depreciation-16.6 -15.66 -13.48 -10.6 -7.82

Profit before tax55.43 13.19 34.66 29.09 21.82

Tax-19.49 -5.52 -10.92 -9.83 -8.08

Net Profit 35.94 7.67 23.74 19.26 13.74

Equity Share capital15.88 15.88 13.87 10.67 10.67

EPS (Unit Curr)22.63 4.83 17.12 18.05 12.88

Cash EPS (Unit Curr) 32.32 14.15 23.40 27.13 19.72

Operating Profit Margin(%) 15.34 10.29 15.73 16.95 17.40

Net Profit Margin(%) 6.19 1.77 6.26 6.51 6.59

ANALYSIS & REPORT

Why to invest in shares of Visaka Industries Limited?

1. SECTOR:

Growth for Cement product industry depends on Real estate and construction and infrastructure relted activity. With the

initiatives made by the government in various infrastructure projects, road networks and housing facilities, coupled with the

housing sector boom and urban and rural development, high growth in the cement product industry is expected in forthcoming

years. The cement product industry especially the asbestos cement manufacturers cheer on the impetus given to rural

infrastructure in the union budget especially on the thrust given on rural housing by the government through Indira Awaas

Yojana and increased allocation to rural housing is a positive sign.

Fibre cement sheets are gaining popularity because of their strong physical properties as compared other roofing materials.

The fiber cement industry is estimated to grow at 5% for financial year 2009-10. Asbestos cement industry is growing at 10-

12%. Industry was relatively untouched by global turmoil but industry may find it difficult to survive with campaigns against

asbestos products. If asbestos loses out then companies with diversified product portfolio with be able to outperform.

Cement is a necessary component of infrastructure development and a basic raw material for the construction industry. The

total utilization of cement in a year is used as an indicator of economic growth. India is the world's second largest producer of

cement after China, with cement companies adding nearly eight million tonnes (MT) capacity in April 2009, taking the total

installed capacity to 219 MT.


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2. COMPANY:

Visaka industries limited is the second largest manufacturer of fibre cement sheets in india with an estimated market share of

more than 15% by sales. Visaka industries being rural sector player holds tremendous potential for its asbestos division as whenever economic

conditions of the rural poor improves, their spending in durable products like asbestos cement sheets is increased. VIL is growing at a CAGR of 29% for past five years, highest in the industry.

Company is making continous efforts to increase production capacity through new and existing plants. Companys New product Reinforced Building Product is gaining gradual acceptance in the market as it is preferred over

wood/gypsum based products. The product also commands export potential to countries of the likes of Srilanka, Bangladesh,

and Middle Eastern Countries.

To make its portfolio attractive, visaka industries is venturing into power sector there by enhancing its source of revenue

generation in the long run.

3. FUNDAMENTALS:

During FY 2009 Company Gross Revenue and PAT registered a growth of % 32% and 368% on y-o-y basis to Rs 574

croresand Rs 35.94 crores respectively. Operating profit margin increased by 408 basis points to 14.91% in FY09 due toimprovement in realizations in both cement asbestos and spinning business.

With the commencement of its V-Panel unit, this unit will generate annual revenues of around Rs 20 crores at full capacity

utilization.

Net Profit for the Nine Months Ended Dec09 increased by 53% to Rs 42.66 lacs as against Rs 27.89 crores in the same

period last year.

Asbestos cement business being the main line business accounts for about 79% of companys sales. Production registered

a degrowth of 7.8% on account of abnormal increase in cement cost and slowing down of rural construction activities,

however sales (quantity) registered a growth of 6.25%.

Companys total production and sales in Reinforced Business Division was 12.760 and 10,019 MTs for FY09. However

company posted a loss of Rs 5.92 crores. Going forward we anticipate a turnaround as capacity utilization in this divison is

expected to be increase.

Notes: Figures and graph sourced from www.bseindia.com, capital market and annual report (2008-09).

END

FUNDAMENTAL ANALYSTS DESIGNATION CONTACT NO.

Rajesh Gupta Research Head 0124 [email protected]

[email protected]

Prakash Pandey AVP- Portfolio management 0124 - 3024864

[email protected]

Varun Khanna Research Associate 0124 [email protected]

Shashi Srivastava Research Associate 0124 3024840

[email protected]

Tanisha jolly Research Associate 0124 3024840

[email protected]

Suvarna Binjola Research Associate 0124 3024869

[email protected]

Shakti Rajpal Research Associate 0124 3024869

[email protected]
http://www.bseindia.com/http://www.bseindia.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.bseindia.com/


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