ICICI Securities: Visaka Industries - ACS To Drive Rapid Earnings Growth
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ICICI Securities Report
FY21E is likely to be one of the most profitable fiscals for Visaka Industries Ltd. in the last decade despite the ongoing pandemic. The profit will be largely attributed to the sudden demand tailwind in the company’s asbestos-cement roofing sheets (ACS) segment. The higher farm income, recent labour migration to rural areas, record rabi crop production and expectation of normal monsoon this fiscal has led to a sharp improvement in demand and pricing for the ACS segment (refer Table 1). Improving profitability and strong free cash flow (FCF) generation would see substantial paring of debt resulting in 340 basis points improvement in return on capital employed (RoCE)s in FY21E. Higher CFs from ACS in the near term would help build incremental capacities in Vnext and in turn structurally improve earnings visibility over the next few years. Visaka Industries is available at 5.9 times FY22E earnings, which seems attractively valued at these levels.
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