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The Company was established in 1985 and has two divisions. First is Building products division which manufactures cement asbestos sheets, fibre Cement Boards and Panels, and it accounts to over 67% of the revenue. Other division is Textile division. Visaka has 11 manufacturing facilities across India.
It has a distribution Network of 6000 retailers. The increase in rural income, reduced GST Rate and government’s initiative in favour of affordable housing will aid to deliver healthy sales. Visaka has also launched a new solar roofing product named, ‘ATUM’, is expected to further enhance sales. Visaka generates revenue of about 33% right now from non-asbestos products. They aim to increase this to ~50% over the next three years. They hope to achieve this by enhancing their installed capacity of fibre cement boards and panels business.
The key risks are currency fluctuation, cheaper alternative products and ban on asbestos products.
With improving margin, we estimate Visaka’s RoCE and RoE to improve over the next two years to reach 18% and 16% respectively. We expect the company to clock higher RoCE on account of better product mix and lower operational cost.
Thus, we initiate a coverage on Visaka Industries Ltd with a BUY and Target price of Rs.1075/-.
