IFB Industries Ltd is mainly into the production of Home appliances especially washing machines and engineering goods, which are mainly consumed by the auto industry. IFB is one of the pioneers in the front load washing machines in the country. The advantages of the front-load washing machines over the top load ones could help the company grow its topline going forward. The buoyant outlook of the home appliance industries and the expected increase in the demand for washing machines backed by the growth in the auto component sector could further push the growth of IFB going forward.
Due to increase in the price of steel, plastic and other input materials and also due to severe price war all the washing machine manufacturers felt the heat during FY09. However the same slightly stabilized during FY10. Demand growth has been slow because of low penetration of washing machines in suburban India. Being an appliance that has substitute, the utility perception of the product is low and washing machine rank low in the priority list of consumers. The product is still to find acceptance in the rural market where a majority of the population resides, as a result demand remains restricted to the bigger towns and cities. With the increasing urbanization and marginal price difference between front loading fully automatic (lower end) and top loading automatic washing machine, front loading fully automatic washing machines are being preferred by a larger section of consumers, and going forward this could help IFB to increase its business and market share.
IFB in FY10 has grown steadily in both its topline and bottomline. This growth is expected to continue going forward as the company reaches out to more geographies and increases its customer base across the nation. stiff pricing pressure faced by IFB could continue going forward and this could impact the profitability of the company, as the company may not be able to raise the prices of its final products in tandem with the possible growth in raw material prices going ahead.
IFB reported a strong performance in FY10 results. The net sales of IFB stood at Rs 534 crs in FY10 as against Rs 443.17 crs in FY09. The operating profit of the company stood at Rs 66.19 crs in FY10 as against Rs 323 crs in FY09. This was because in FY09, the operating profit included the impact of extraordinary income of Rs 278 crs received from interest waiver. Hence on a cut-to-cut basis, the operating profit of the company has actually shown an increase in FY10. The Adjusted PAT of the company stood at Rs 53.76 crs as against Rs 36.99 crs in FY09 showing a 45% jump y-o-y. For the quarter ended 31st March 2010, the company saw a sequential fall in the topline from Rs 178.74 crs in Q3FY10 to Rs 140.82 crs in Q4FY10. However on a y-o-y basis the company saw a growth in its sales from Rs 105.21 crs in Q4FY09. The adjusted PAT of the company stood at Rs 21.72 crs in Q4FY10 as against Rs 10.71 crs in Q4FY09 and Rs 17.02 crs in Q3FY10. The EPS of the company at the end of Q4FY10 stood at Rs 6.11 as against Rs 3.61 in Q4FY09. For FY10, the EPS stood at Rs 15.14 as against Rs 12.48 in FY09.
IFB reported a strong performance in FY10 results. The net sales of IFB stood at Rs 534 crs in FY10 as against Rs 443.17 crs in FY09. The operating profit of the company stood at Rs 66.19 crs in FY10 as against Rs 323 crs in FY09. This was because in FY09, the operating profit included the impact of extraordinary income of Rs 278 crs received from interest waiver. Hence on a cut-to-cut basis, the operating profit of the company has actually shown an increase in FY10. The Adjusted PAT of the company stood at Rs 53.76 crs as against Rs 36.99 crs in FY09 showing a 45% jump y-o-y. For the quarter ended 31st March 2010, the company saw a sequential fall in the topline from Rs 178.74 crs in Q3FY10 to Rs 140.82 crs in Q4FY10. However on a y-o-y basis the company saw a growth in its sales from Rs 105.21 crs in Q4FY09. The adjusted PAT of the company stood at Rs 21.72 crs in Q4FY10 as against Rs 10.71 crs in Q4FY09 and Rs 17.02 crs in Q3FY10. The EPS of the company at the end of Q4FY10 stood at Rs 6.11 as against Rs 3.61 in Q4FY09. For FY10, the EPS stood at Rs 15.14 as against Rs 12.48 in FY09.
We feel that investors could buy the stock at the CMP and add on falls to the Rs 112-119 band for sequential targets of Rs. 163 (8.5xFY11(E) EPS) and Rs. 182 (9.5xFY11(E) EPS) in the next 1-2 quarters.
Source: Internet (Valuenotes by HDFC)
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