Mayur Uniquoters: Robust profitability owing to attractive strategic positioning vis-à-vis industry
CMP: Rs. 450, Target Price: Rs. 600: Upside Potential: 33%
Creating multiple moats: Over the years, Mayur has successfully created its moat within a competitive industry and is working towards widening it: (i) Mayur is a professionally run company investing in R&D with a focus on value added products while the other 5-6 organized players have languished much like the unorganized sector. Mayur’s focus on quality has enabled the company to command premium pricing (5% over peers) in the domestic market allowing the company to command higher margins. With a view to focus on value added products, Mayur has developed a marketing team by setting up a subsidiary in US and hiring experienced personnel for targeting the developed markets. (ii) Mayur is the only company from India and among the only 2 in Asia to cater to the US auto OEM requirements which requires adherence to stringent quality norms and a seeding phase of over three years. (iii) Mayur enjoys economies of scale, as its capacity is 2x that of the next largest player. (iv) Mayur possesses strong leadership / visionary management, scalable business, above average industry growth, core ROE of 30% and strong cash flows.
Wonderla Holidays: On the cusp of next growth phase
CMP: Rs. 314, Target Price: Rs. 410, Upside Potential: 30%
We expect Wonderla Holidays’ revenue to clock 25% CAGR to INR3.2b over FY14-17E and PAT CAGR of 27.1% to INR886m over FY14-17E. In our view, over the next 10 years, amusement parks will emerge as a strong avenue for entertainment as penetration improves substantially. We believe the company is on track to be a pan India player over the long run and will be a major beneficiary of amusement park industry’s development. The stock trades at 28x FY16E and 20x FY17E earnings and we value WONH at 26x FY17E EPS, with a target price of INR410, given its strong industry positioning, multiple growth opportunities and high entry barrier. We initiate coverage with a Buy rating.
Marico Kaya Enterprises: Creating multiple moats
CMP: Rs. 967, Target Price: Rs. 1250: Upside Potential: 30%
Valuations & View: Over the last decade, Kaya has had a long learning curve and has staged an impressive turnaround over the last eighteen months. With the company now having de-merged from Marico, we believe the company will not experiment too much with its business model and maintain its core focus on skin cure services. The stock is currently trading at a P/E of 25x FY17E EPS which is a 22% discount to other consumer stocks. We thus value the company at INR 1250 at a P/E of 32x FY17E in line with the consumer basket.
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