VST In­dus­tries

Dalal Street Investment Journal - - SPECIAL REPORT -

VST In­dus­tries Limited is one of the ma­jor In­dian con­glom­er­ates en­gaged in man­u­fac­tur­ing of cig­a­rettes con­tain­ing tobacco and un­man­u­fac­tured tobacco. The com­pany’s man­u­fac­tur­ing fa­cil­ity in Hy­der­abad in Te­lan­gana mainly op­er­ates in the tobacco seg­ment and has a strong ge­o­graph­i­cal pres­ence across India along with grow­ing pres­ence abroad.

The com­pany is on a growth mo­men­tum, de­spite the trend of year-on-year tax hikes on tobacco. The com­pany’s strate­gic port­fo­lio ex­pan­sion through marked dif­fer­en­ti­a­tion in prod­ucts has suc­cess­fully earned it high priced trade­marks like Edi­tions King size & To­tal 69mm over the past two years. Also, the com­pany’s ex­ist­ing trade­marks such as Spe­cial & Red Charms are also de­liv­er­ing strong per­for­mance in the ma­jor mar­kets.

VST In­dus­tries’ ef­forts to cut through the com­pe­ti­tion by of­fer­ing in­no­va­tive prod­ucts have been well-re­ceived by the mar­kets, while the com­pany’s strate­gic ex­pan­sion plans and grow­ing in­vest­ments to strengthen its dis­tri­bu­tion in­fra­struc­ture and widen its ge­o­graph­i­cal pres­ence is likely to en­sure com­pany’s con­tin­ued strong per­for­mance.

On the fi­nan­cial front, VST In­dus­tries Ltd posted 4.12 per cent drop in its rev­enue from ₹586.02 crore in Q1FY17 to ₹561.86 crore in Q1FY18. The com­pany’s profit be­fore in­ter­est, de­pre­ci­a­tion and tax (PBIDT) stood at ₹65.31 crore in Q1FY18, down by 2.38 per cent on a year-on-year ba­sis.

The profit af­ter tax of the com­pany also de­creased by 8.99 per cent to ₹39.79 crore in the first quar­ter of FY18, as against PAT of ₹43.72 crore in Q1FY17.

On an an­nual ba­sis, the com­pany’s rev­enue in­creased by 10.86 per cent to ₹2,282.39 crore in FY17 from ₹2,058.77 crore in FY16. The com­pany’s PBIDT stood at ₹246.16 crore in FY17, up by 3.69 per cent from ₹237.40 crore in FY16. The com­pany’s profit af­ter tax stood at ₹167.21 crore, up by 9.21 per cent in FY17 from ₹153.11 crore in FY16. On the val­u­a­tion front, the share price of VST In­dus­tries Limited is trad­ing at a PE of 25.54x as against its peers such as God­frey Phillips (49x). The com­pany’s PE also seems to be slightly un­der­val­ued in com­par­i­son with the in­dus­try PE of 33.17x.

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