Visaka is a good buy at Rs 270

Visaka is a good buy at Rs 270

By Rajiv Kapoor | 1 April, 2017

Visaka Industries was established in 1981 and commenced the manufacturing of corrugated cement sheets in 1985 with an initial production capacity of 36,000 tonnes per year. The company diversified into manufacturing synthetic yarn in 1992 and later established another factory in Nagpur to produce man-made yarns. The company is now the second largest cement sheet manufacturer in India. It has eight factories with an annual capacity of 802,000 tonnes of corrugated sheets a year. The spinning plant is the world’s largest installation of its kind, producing around 12,500 tonnes of yarn per annum. The company has also forayed into fibre-cement boards and panels. This was established in 2009 to cater to the needs of modern construction designs. The first factory was established in Telangana and the second in Maharashtra in 2013. This division has a capacity of 130,000MT of fibre cement boards per year. This division also produces panels to assembled partition walls. Cement asbestos products continue to be in demand particularly in the rural market. The product is superior due to its affordability and qualities such as corrosion resistance, weather and fire proof nature. At present, there are about 20 entities in the cement asbestos industry, with around 72 manufacturing plants with an annual capacity of 57 lakh MT throughout the country. The government’s prime emphasis on housing for all in the next five years augurs well for the industry. Favourable industry developments, well diversified portfolio and rich expertise in tapping the potential opportunities will propel the company in good stead in the coming years. The company is continuously striving to enhance the product’s distribution reach and market presence by strengthening its network of stockists, resorting to aggressive advertising and introduction of new colour coated sheets. Coupled with inherent advantages associated with the product such as cost affordability, will result in a growth rate of 10% in the current fiscal.

It is expected that asbestos cement sheets profitability will remain strong on the back of increased demand in the monsoons and subdued fibre cost, while cement boards and panels profits are also expected to have steady domestic sales. The company has reduced its debt burden from Rs 299.46 crore to Rs 194.90 crore.

On a paid-up capital of Rs 15.29 crore, the company has reserves of Rs 372.47 crore, while the book value works out to Rs 238 per share. The promoters hold 37.6% equity capital of the company, while the institutions hold 4.1% and the balance 58.3% shares are widely held among the Indian public. The stock currently quoting at Rs 270 is a good buy with a fundamental target price of Rs 400 in 12 months.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.


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