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Friday, July 24, 2009

Visaka industries:-Paid call to members

Many of you repeatedly in my mail have asked for paid calls and what they will be and all.Now as an amateur and being a social guy I would always safeguard the vested interest of investors than something else.The open blog is a place for me to give guidance..paid blog is for the one who needs those calls and my bigtime guidance desperately.Anyways here"s an example of a paid member call and the type which I provided just few trading sessions back.

Sunday, May 10, 2009
Stock idea:-Visaka industries

Scripscan:Visaka Industries Ltd
Cmp:61
Target:110
Return:80%
Duration:2-4 months
Traded in:Nse-bse

Story:VIL was incorporated on 18th June, 1981 as 'Visaka Asbestos Cement Products Limited'. With effect from 9th August 1990, the name of the Company was changed to Visaka Industries Limited. The Company is a Rs. 500 cr. turnover, multi product/location establishment, presently engaged in the manufacture of Building Products, Synthetic Blended Yarn.

The Company's Building Product Plants (Asbestos Cement Sheets) are located at 7 different places. The Synthetic Blended Yarn factory is located at Nagpur in Maharashtra.

Product Profile:
-------------------------
Asbestos Cement Sheets: It is a 70 years old industry with a total annual production capacity in India being 2.70 mn tonnes. There are mainly 4 major players in this industry cumulating to 59% of the total production capacity.

During the year 2006-2007 the ACS Industry has grown at 16% p.a. ACS is mainly used as roofing materials in rural, semi urban areas and by Industrial sector. The company presently has production facilities.

The company has recently set a factory to make a new product 'Reinforced Building Boards' new age multi-purpose cement board with a wide range of applications. The project cost was Rs. 40 cr. for setting up 60,000 MT production facility, funded through fund raised by shares through QIP route on 24.01.07.

RBB is extensively used for false ceiling. Doors, Partitions pre-fabricated structures. Wall Paneling, backliners and to variety of other applications in residential, commercial as well as industrial segments. These boards have gained wide market acceptance and is widely preferred over wood/gypsum based products. There is a wider scope for exports to Srilanka, Pakistan, Bangladesh and Middle Eastern Countries.

Textile Division:
--------------------------
VIL diversified in 1992, to manufacture Synthetic Blended Yarns, using Twin Air Jet technology of Murata, Japan. Its manufacturing plant at Nagpur, Maharashtra, has 28 Murata Twin air jet machines, with a total of 1816 spindle position. The yarn produced, range from 100% Polyester to Polyester-Viscose blends (85/15). The plant produced 6619 tonnes of yarn after the capacity was increased by 50%. Visaka's production facility at Nagpur is the single largest Twin Air Jet Spinning Installation in the world. Visaka's Yarns are used by leading textile mills to manufacture a wide range of fabrics including shirtings, suitings, fashion fabrics, upholstery and embroidery laces. The company exports 40% of Yarn production to Europe.

RAW MATERIALS
---------------------------

The main raw materials for Building Products are Asbestos Fibre and Cement. The former is imported amongst others from lab Crysotile INC., of Canada and Sama Fibres of Brazil, whereas the latter is manufactured indigenously and is procured amongst others from Orient Cement, Rajashree Cements and India Cements Ltd.

The main raw materials required for the Spinning Division are Polyester, Acrylic and Viscose Fibres. The Company procures the Polyester Staple Fibre from Reliance Industries Ltd., IPL, and IOCL etc. The Viscose Staple Fibre is procured from Grasim Industries Ltd. and South India Viscose Ltd.

The main raw materials for Reinforced Building Boards include Fly ash, Cement, Silica/lime and Aluminium hydroxide. Cellulose/Jeans Pulp/Waste Craft Paper is used in different combinations to an extent of 8% in raw material mix.

In 2007-08 VIL acquired Shakti Roofing, a Pune based Rs. 50 cr. revenue & Rs. 5 cr. PAT company during 2006-2007, which has made VIL a market leader with an installed capacity of 6,30,000 tonnes by the end of 2006-2007, it has set up its plants in multiple locations which enable it to reduce its cost component incurred due to transportation of raw materials and finished goods. It has its plants strategically placed which helps its marketing network to work efficiently.

The availability of the product in multiple outlets help to capture the market faster and improve the company's market share. Visaka is having a strong network of 4000 Stockists/Dealers throughout India. The easy accessibility of its network is appreciated by the consumers of the company. As VIL has its depots in 36 major cities and towns, supply to the end consumer is more smoother.

Foray into RBB will have synergy with the ACS division:
----------------------------------------------------------------------------------------

Reinforced Building Board is a new age multi-purpose cement board with a wide range of applications. These boards have gained wide market acceptance and is widely preferred over wood/gypsum based products. The unique composition of manufacturing process makes this wood free eco friendly board the 'preferred' choice amongst Architects and Interior Designers. Boards are very economical when compared to the similar boards. They are resistant to environmental corrosion and are more durable and hence affordable. Urbanization is leading to high rise apartments where Reinforced Building Boards are used for Internal walls to reduce weight and increase in floor area. The demand for false roofing and partition board is increasing by 15% to 20% per annum due to increased construction activities whereas availability of wood based material is dwindling by around 10% every year. Re-inforced Building Boards has been slotted to capture this gap-in demand supply situation. Through the company's extensive network the product is marketed very efficiently, thereby increasing the demand for the product. RBB has a large market acceptance and is a synergy to the ACS division of Visaka, boosting up its revenues and profits.


Financial Performance:
-------------------------------------

Y E A R E N D E D
31 . 03 . 08 31 . 03 . 07 31. 03. 06
Rs/cr. Rs/cr. Rs/cr.

Gross Sales 459.57 445.20 303.73

EBIDTA 44.58 60.97 50.15

Interest 15.72 12.18 10.45

Depreciation 15.66 14.76 10.60

PBT 13.19 34.03 29.09

PAT 7.67 23.28 19.26

Equity 15.92 13.91 13.21

EPS (Rs.) 4.82 16.74 14.58

Book Value (Rs.) 100/-

In 07-08, its PAT came down heavily, mainly due to increased cost of cement and 6 cr losses suffered by garment division (finally, company sold its garment factory at a loss). However, company has maintained 30% dividend. It allotted 2007995 shares to Shakti Roofing.

Future Prospects:
---------------------------
Y E A R E N D E D
9 Months
31 . 12. 08 31. 03. 09E 31. 03.10E
Rs/cr. Rs/cr. Rs/cr.

Net Sales 419.36 540.00 590.00

PAT 27.90 35.50 42.00

Equity 15.88 15.88 15.88

EPS (Rs.) 17.57 22.35 26.45

P.E. Ratio 1.74 1.51

Company has reported bumper results for 9 Months:

a) Topline has gone up by 39% as against 9 months of previous year.

b) PAT is up a massive 617% as PAT in 9 months of previous year.

c) Even Tax Provision is 15.58 crs. as against 2.85 cr. in 9 months previous year.

d) 9 months profits are higher by 264% as compared to profit of entire 07-08.

A.C. Sheets Ind. continues to grow at 15% which bodes well for Visaka and company may plan further expansions. It is already setting up 'RBB Sandwiched Panel' unit which will start production by Nov. '08.

In last one year, Visaka fortunes have changed dramatically. Due to sharp rise in demand, company has been able to pass on increased cost of cement and other R/M. Further, its profit margins have expanded dramatically. For Example last year, company was selling A.C. Sheets at around Rs. 88/-. In current year, A.C. Sheet prices are ruling around Rs. 130/-.



Myth/Facts about ACS:
-----------------------------------
a) The bias against the use of asbestos in a few countries is due to the adverse Western media coverage relating to altogether different types and usages of asbestos in these countries i.e. sprayed-on asbestos and friable asbestos insulation. Usage of blue variety in such applications resulted in unfortunate Western experience. These usages have since been discontinued in the West. In India, asbestos has never been used as sprayed insulation.

b) In India, only chrysotile variety is used. The fibres are mixed with cement. After all the fibres are locked into the matrix, there can be no air contamination.

c) Even in the West, studies of workers using chrysotile have no increased risks.

d) There is no risk whatsoever in living or working under A.C. Roof, as asbestos fibre are bonded with cement and do not release in the atmosphere.

e) Transportation of drinking water in A.C. Pipes is absolutely safe and is confirmed by WHO.

f) In India, A.C. Sheets have been used by railways for last 50 years whereover, 1 cr. people step everyday. A.C. Sheets have withstood the test of time with no reported casualty. Another major consumption of A.C. Sheets is in the roofing of FCI godowns where millions of tonnes of foodgrains are stocked.

g) India uses only 6% of asbestos produced in the world and rest is used in other countries.

h) U.S.A. still imports A.C. pipes for water transportation. Canada has reinforced asbestos to make asphalt asbestos compound for re-paving of roads.

i) 94% of asbestos produced worldwide is consumed by countries other than India. This confirms that these products do not cause the health problems as propagated by Industrial competitors.

Valuations:
------------------
Stock is trading at:

1) 2.72 x FY09E EPS.

2) 2.30 X FY10E EPS.

3) 0.50 x BVFY09E.

Needless to say that scrip is a screaming buy. It has un-interrupted dividend record of 16 years. Pays 30% dividend. Market cap is just 97 crs as against 09E sales of 540 crs. Dividend for 08-09 likely to be hiked to 45% which means tax free dividend yield can be nearly 8%. Promoters are investor friendly and aggressive. Turnover has grown from 5 crs. to 500 crs. in 15 years.A great buy altogther.

Regards,
ARUN
9804589299
I can be reached at:arunanalyst@rediffmail.com

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