Buy Visaka Industries; target of Rs 455: ICICI Securities

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ICICI Securities research report on Visaka Industries

FY21E is likely to be one of the most profitable fiscals for Visaka Industries (VSKI) in the last decade despite the ongoing pandemic. The profit will be largely attributed to the sudden demand tailwind in the company’s 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 FCF generation would see substantial paring of debt resulting in 340bps improvement in RoCEs in FY21E.

Outlook

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. VSKI is available at 5.9x FY22E earnings, which seems attractively valued at these levels.

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