Visaka Industries - Raising Roof Through Innovation

Visaka Industries - 1QFY19 –Building Momentum in Building Products

Visaka - Retain 'Sell', Sust of Peak Margins in FC Sheets & Ramp-Up of VBoards & Atum Holds the Key

India Equity Value investor, Trivikram Consultants

Prashant Vaishampayan

India Equity Value investor

Picking Long Term Multi-bagger stocks

Trivikram Consultants

Trivikram Consultants is an equity research service founded by Prashant Vaishampayan, a registered Research Analyst with SEBI in India. Prashant has done equity research since 1992.  He worked with Jardine Fleming, SG Securities, UBS and Kotak Securities. Since 2010, he is managing his portfolio and doing outsourced equity research for institutional clients. A team of six professionals helps him in equity research. We focus on pharma, agro-chemicals, auto and auto components, banks and financial services, specialty chemicals and niche manufacturing sectors.   

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/16979" target="_blank">Visaka Industries (VSKI IN)</a> reported marginally better than expected 2QFY19 financial results. The revenues at Rs 2,510 mn were 7% higher than estimated. Increase in other expenses hampered the EBITDA margins. PAT at Rs 139 mn was 5% higher than our estimates of Rs 133 mn. YoY decline in EBITDA margins lowered the free cash flow generation for 1HFY19. Larger projects of ATUM plant and commencement of the Jhajjar plant may provide the impetus for growth in 2HFY19. The ability of VSKI to take a price hike without sacrificing volumes is expected to sustain the guided double-digit growth rate in FY19E. The new launches and additional facilities are predominantly in the non-asbestos category, in line with the management focus to de-risk the business operations. The Yarn segment is showing signs of recovery.RWERWERWe forecast a revenue/EBITDA/PAT CAGR (FY18-21E) growth of ~12%/~14%/~19% respectively. We revised our FY19E-20E EPS estimates to Rs 49.2 / Rs 60.6 respectively and we expect FY21E EPS of Rs 70.5. Our fair value estimate of VSKI comes to Rs 975/- (v/s Rs 1,100/- earlier) for the next 12 months.<table class="table table-striped"><tbody>
<tr>
<td> </td>
<td style="text-align: right;"> FY17 </td>
<td style="text-align: right;"> FY18 </td>
<td style="text-align: right;"> FY19E </td>
<td style="text-align: right;"> FY20E </td>
<td style="text-align: right;"> FY21E </td>
</tr>
<tr>
<td>PE (x)</td>
<td style="text-align: right;">         17</td>
<td style="text-align: right;">       11</td>
<td style="text-align: right;">         9</td>
<td style="text-align: right;">         8</td>
<td style="text-align: right;">         7</td>
</tr>
<tr>
<td>ROE</td>
<td style="text-align: right;">11%</td>
<td style="text-align: right;">15%</td>
<td style="text-align: right;">15%</td>
<td style="text-align: right;">16%</td>
<td style="text-align: right;">16%</td>
</tr>
<tr>
<td>ROCE</td>
<td style="text-align: right;">18%</td>
<td style="text-align: right;">22%</td>
<td style="text-align: right;">22%</td>
<td style="text-align: right;">24%</td>
<td style="text-align: right;">25%</td>
</tr>
</tbody></table><div class="content-caption">Source: VSKI Annual Report 2018, Trivikram Consultants Research as of 15th November 2018</div><div class="content-caption">E = Estimates</div>

Visaka Industries (VSKI IN) reported marginally better than expected 2QFY19 financial results. The revenues at Rs 2,510 mn were 7% higher than estimated. Increase in other expenses hampered the EBITDA margins. PAT at Rs 139 mn was 5% higher than our estimates of Rs 133 mn. YoY decline in EBITDA margins lowered the free cash flow generation for 1HFY19. Larger projects of ATUM plant and commencement of the Jhajjar plant may provide the impetus for growth in 2HFY19. The ability of VSKI to take a price hike without sacrificing volumes is expected to sustain the guided double-digit growth rate in FY19E. The new launches and additional facilities are predominantly in the non-asbestos category, in line with the management focus to de-risk the business operations. The Yarn segment is showing signs of recovery.RWERWERWe forecast a revenue/EBITDA/PAT CAGR (FY18-21E) growth of ~12%/~14%/~19% respectively. We revised our FY19E-20E EPS estimates to Rs 49.2 / Rs 60.6 respectively and we expect FY21E EPS of Rs 70.5. Our fair value estimate of VSKI comes to Rs 975/- (v/s Rs 1,100/- earlier) for the next 12 months.

 
 FY17 
 FY18 
 FY19E 
 FY20E 
 FY21E 


PE (x)
         17
       11
         9
         8
         7


ROE
11%
15%
15%
16%
16%


ROCE
18%
22%
22%
24%
25%

Source: VSKI Annual Report 2018, Trivikram Consultants Research as of 15th November 2018E = Estimates

Visaka Industries - 2QFY19 – Price Hikes to Ease the Margin Pain