VISAKA INDUSTRIES LIMITED - A RISING STAR

Brief Information about Company (Investor Point of view):

CMP                          :  109/-

Equity Capital  & Face Value  : 1,58,80,952 Shares of Rs 10/-Each

Promoter ‘Holding              :  37.54%

Market Cap                    :  173 Cr

Listed on                      : NSE & BSE

Turnover & Profit ( Fy 2015-16) : 729.16 Cr and Profit 15.51 Cr   ( Upto Dec 2015 Qtr)

Debt Status                    : 1% D/E ratio as on 31.3.2015

P/E                           : 8

52 Week High/Low             : 189/85

Dividend                        : Rs 5/- on FV of Rs10/- (2015) i.e 50%

About Company:

Visaka Industries, established in 1985, is engaged in two attractive businesses. Building products - cement asbestos products and fiber cement flat products (V-Boards and V-Panels) Synthetic yarns for the textile segment

Key Points:

·        Headquartered in Hyderabad, Visaka Industries has 11 manufacturing facilities across India. These plants possess an aggregate production capacity (annual) of about 8,02,000 tonnes of corrugated cement asbestos sheets and 1,29,750 tonnes of fibre cement flat board products. The Company also comprises a spinning plant capable of producing 9,000 tonnes of yarn per annum·        Second Largest producer of Asbestos Sheets in India

·     PERFORMANCE:

•     2014-15 Strengthened revenues by 14.7% from 883 Cr (2013-14     to 1013 Cr (2014-15). PAT increased from 11.97 Cr (2013-14)     to  21.24 Cr   (2014-15)
• ·       Book Value of the Company is Rs 218
• ·      Debt Reduced from 285 Cr ( 2014-15) to 225 Cr in 2015           (Till Sept 2015)

Visaka Industries Limited has three product divisions:

1.   Asbestos Sheets: With installed capacity of 8.02 lac tonnes, VIL is second largest producer of Asbestos Sheets in India. In 1996, VIL was 6th largest producer which shows that its efficient and visionary management has made big strides in the industry. This division contributes around 71% of total revenues.

2.   Fibre Cement Flat Products (V-Next division): Comprising of V-Board and V-Panels and called as emerging generation products division, VIL with installed capacity of 1.30 lac tonnes has emerged as the largestproducer in India. This division contributed 11% to company's total revenues. V-Board and V-Panels are substitute for Plywood and Gypsum Boards. These panels are not only cost competitive but also environment friendly and are used for: Acoustic Partition,Roof Underlays,Gate Cladding,False Ceiling,Wall Panelling,Kitchen cabinets,Mezzanine flooring,Garden fencing,Wall partition.

These products have huge potential and management has strong focus for big growth of this division in coming years

3  Textile: VIL is producing synthetic yarn through air-jet spinning with capacity to produce 9000 tonnes yarn annually and contributes 18% to its topline.

Future Prospectus & Strength

With the improved market conditions as well as initiatives made by the government of India in various infrastructure projects, such as Swatch Bharath programme, road networks and housing facilities coupled with the aggressive advertisement campaign being done by the Company and the inherent advantages associated with the product such as cheaper cost etc., it is expected that the industry is growing at an average rate of 13 to 15%. Export opportunities in Africa / Maldives / Sri Lanka and GCC countries is encouraging. Company supplying its boards to Panel manufacturers in Saudi and Iran. New applications for Acoustics and Tile underlay is gaining popularity. As Plywood is turning out to be costlier, many manufacturers are turning towards Cement boards.

Weakness:

Lack of entry barriers. Import of Cement board materials from Philippines/Thailand / China and Malaysia is a matter of concern.

With the shale oil growth coming down, the volatile oil prices directly influence ressure on polyester fibre prices almost on daily basis. This cannot be passed on to customers on day-to-day-basis. Hence, new element of risk has been introduced in this business, which was not there earlier

Conclusion:

Visaka Industries Limited , is an excellent buy at this price  due to the following reasons as per my view:

1.  Stock is trading at 4.27x FY16 eps . The Valuation is related very low in the industry it has its presence.
2. Book Value is Rs 218/- which is a very best at this space
3. Company having an better future prospectus due to overall positive sentiment and growth in its sector
4. High Quality Management and Consistent Dividend paying Company
5. Re-rating for Asbestos Sheet industry may happen any time which offers a good buy at this throwaway price
6. Much Hopeful that Company may announce Interim Dividend in       March 2016.
7. A Safe bet for long term investors with a price target of 250-300 in 2 year horizon.