Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

MIRC Electronics - Initiating Coverage - Kotak

Posted On: 2018-01-28 09:57:28

MIRC Electronics (MIRC) is one of India's oldest home appliance players, with a presence in TVs, room ACs and washing machines. The company's brand "Onida" is one of the most enduring one in the consumer space (fourth most trusted brand in the consumer durables category - by Brand Trust Report 2016). Given the favourable demographics coupled with rising disposable income, the demand for consumer durables is expected to remain robust. Realising the market potential, MIRC is making efforts in cutting costs and monetizing surplus assets. With a much stronger balance sheet in FY18, the company now plans to significantly raise marketing spends in coming months. We expect 15%/51% sales/EBIDTA CAGR over FY17-FY19E. The company is forecast to turnaround in FY18 after several years of losses. The stock trades at reasonable valuations of ~27.5x/20.4x and ~17.5x/13.8x FY18E/FY19E EPS and EV/EBIDTA respectively. Initiate coverage with BUY with a target price of Rs 70, valuing the stock at 28x FY19 earnings.

Key Investment argument

- Strong demand drivers in place: The Consumer Electronics and Appliances (CEA) market has been witnessing robust growth trends in the past 5 years. Moving forward, the market is expected to foresee double digit growth reinforced by the surging rural consumption, reducing replacement cycles, increasing penetration of lifestyle appliances, and availability of multiple brands at various price points. The CE market revenues is expected to grow at a cumulative average growth rate (CAGR) of 17.2% from FY16 to FY21 while the Appliances segment is expected to grow at a CAGR of 11.6% over the same period, resulting in a CAGR of 16.5% for the overall CEA market. In comparison to global growth averages, this is almost double that of other economies.

- Product innovation driven by deep market understanding: Due to its long presence in the Indian industry, the company has a good understanding of the consumer preferences. It recently launched the Onida KY Thunder TV, which delivers 1200 watts of sound and addresses the needs of indian consumer who is also keen to enjoy good quality sound. Sensing the potential of the inverter ACs, the company has launched Regalio-Smart Wi-Fi AC with inverter technology.

- Focus on core business and efficiency: With the manufacturing world increasing moving towards greater automation, MIRC is also making efforts to remain lean and efficient. It has done a meaningful rationalisation of its manpower in FY17 by offering VRS at its Wada plant. The company is also actively seeking to monetize its surplus land and property, with a view to invest the proceeds in driving the core business of Room ACs and TVs.

- Well placed to leverage its strong balance sheet: The company has raised Rs 721 mn through preferential allotment of shares at Rs 37.5 per share. We expect the company to utilize the issue proceeds to raise marketing spends in the coming months.

- Aiming for contract manufacturing: Recently, the government has increased customs duty on various electronics items including TVs. The idea is to boost domestic manufacturing, as electronics imports form a significant component of the non-oil imports. The implementation of GST has also come as positive for the organized industry. MIRC has excess land and manufacturing capacity at its Wada plant, which it plans to utilize for contract manufacturing.


MIRC is well-placed to grow at a steady pace in the future on account of 1) Robust long term demand drivers in place for the company's products like room ACs and TVs 2) Strong balance sheet will enable the company to focus on brand building and promotions, which will drive sales 3) Given the robust infrastructure of the company, it is also aiming for contract manufacturing for other consumer durables, which can be a revenue stream for the company.

The stock is currently trading at 27.5x and 20.4x FY18 and FY19 earnings respectively, which is at a discount to listed peers.

We value MIRC at 28x FY19 earnings and arrive at a price target of Rs 70, resulting in an upside of 37% from current levels.

Shares of MIRC ELECTRONICS LTD. was last trading in BSE at Rs.58 as compared to the previous close of Rs. 55.85. The total number of shares traded during the day was 358328 in over 1747 trades.

The stock hit an intraday high of Rs. 58.6 and intraday low of 55.1. The net turnover during the day was Rs. 20620241.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Pennam Sudhakar disposes 16700 shares of CIGNITI TECHNOLOGIES LTD

SITA DEVI sells shares of MAHAAN FOODS LTD through inter-se transfer

GPT Infraprojects Ltd Bags Order Valued at Rs.81.50 crore

Indian biosimilar market to be worth $40 billion by 2030

Result Update: Mirza International Ltd - BUY - TP Rs.104 - Kotak

Result Update: Asian Granito India Ltd - REDUCE - TP Rs.185 - Kotak

Result Update: Va Tech Wabag Ltd - BUY - TP Rs.378 - Kotak

Result Update: PNC Infratech Ltd - BUY - TP Rs.197 - Kotak

Result Update: KNR Constructions Ltd - BUY - TP Rs.235 - Kotak

Result Update: Talbros Automotive Ltd - BUY - TP Rs.400 - Kotak

Result Update: Sterling Tools Ltd - ACCUMULATE - TP Rs.361 - Kotak

Result Update: Engineers India Ltd - BUY - TP Rs.155 - Kotak

Result Update: Century Plyboards Ltd - BUY - TP Rs.232 - Kotak

Result Update: Eveready Industries India Ltd - BUY - TP Rs.310 - Kotak

Result Update: The Phoenix Mills Ltd - BUY - TP Rs.707 - Kotak

Result Update - Voltamp Ltd - BUY - TP Rs.1320 - Kotak

Result Update: Berger Paints Ltd - SELL - TP Rs.280 - Kotak

Company Visit Note: Ratnamani Metals & Tubes Ltd - NOT RATED - Kotak

Result Update: Insecticides India Ltd - BUY - TP Rs.643 - Kotak

Result Update: Nagarjuna Construction Company Ltd - BUY - TP Rs.135 - Kotak

Result Update: Shankara Building Products Ltd - BUY - TP Rs.1537 - Kotak

Result Update: Dollar Industries Ltd (DIL) - BUY - TP Rs.390 - Kotak

Result Update: Greenply Industries Ltd - ACCUMULATE - TP Rs.161 - Kotak

Result Update: Central Depository Services (India) Ltd - BUY - TP Rs.290 - Kotak

Result Update: Blue Star Ltd - BUY - TP Rs.655 - Kotak

Result Update: Bluedart Express Ltd - ACCUMULATE - TP Rs.2875 - Kotak

Result Update: Mahindra Holidays & Resorts Ltd - BUY - TP Rs.315 - Kotak

Result Update: GHCL - BUY - TP Rs.270 - Kotak

Result Update: NIIT Ltd - BUY - TP Rs.110 - Kotak

Result Update: Quess Corp Ltd - BUY - TP Rs.1072 - Kotak

Result Update: Praj Industries Ltd - REDUCE - TP Rs.108 - Kotak

Result Update: Supreme Industries Ltd - BUY - TP Rs.1205 - Kotak

Granules India Ltd Q2 consolidated PAT climbs to Rs. 60.26 crores

Result Update: Kansai Nerolac Paints Ltd - BUY - TP Rs.485 - Kotak

Result Update: Zensar Technologies Ltd - ACCUMULATE - TP Rs.257 - Kotak

Bajaj Auto Ltd - OPM below estimate; Retain Accumulate - Emkay

Result Update: Bodal Chemicals Ltd - ACCUMULATE - TP Rs.130 - Kotak

Result Update: Kajaria Ceramics Ltd - BUY - TP Rs.500 - Kotak

Result Update: Persistent Systems Ltd - BUY - TP Rs.870 - Kotak

Auto Industry Volume Update: September 2018 - Kotak

Sector Update - Natural Gas - Kotak

Company Visit Note: Jindal Stainless Ltd - NOT RATED - Kotak

Company Update: Bajaj Electricals Ltd - ACCUMULATE - TP Rs.545 - Kotak

Telecom: 2QFY19 preview - no respite - Kotak

Sector Update: Natural Gas - Kotak

Company Update: NBCC (India) Ltd - BUY - TP Rs.95 - Kotak

Sector Update: Paper Industry - Kotak

Management Meet Update: Maharashtra Seamless Ltd - BUY - TP Rs.805 - Kotak

Mid-Year FY19 Bank Outlook: Stress in Non-Corporate Segments - India Ratings and Research

View on proposed banks merger

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2018