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In this post we can explore VST Industries as a Multibagger in Warren Buffet way in Indian Stock Market.
The Vazir Sultan Tobacco Company Limited was incorporated on 10th November 1930. It was created under the Hyderabad Companies Act No. IV of 1320 Fasli and now governed under the Companies Act 1956/2013. The name of the Company was subsequently changed to VST Industries Limited on 30th April 1983. The Company has its Registered Office at Azamabad, Hyderabad.
The Company has a manufacturing facility at Hyderabad and Toopran (Telangana) and its principal activities are manufacture & sale of cigarettes and unmanufactured tobacco.
Company manufactures the following brands including joined manufacturing for new Brand UNIBEV which is under leadership of Vijay Rekhi (veteran UB Spirits)
Warren Buffet, Value & Growth Checklist
Following are the Checklist parameters:
|Capitalization||4000 CR – Can provide good amount of growth like ITC Capitalization|
|History of Consistently Increasing Sales, Earnings & Cash Flow||Yes.|
|Durable Competitive Advantage||Moderate|
|Future Growth Drivers / Sector Growth||Moderate|
|Conservative Debt (long term debt < 3 Net Profit)||No Debts|
|Debt Equity Ratio, Current Ratio||Zero Debt
Current Ratio is 1.8
|Return on Equity must be Above Average||36%|
|Low CAPEX required to maintain current operations||Moderate|
|Inventory Turnover Ratio, Debtor Days, ROCE||Good|
|Management is holding / buying the stock||Promoter holding is at 33% only|
|Market Price < Intrinsic Value||Yes with 60% Discount. Intrinsic Value Calculator|
|Stock Price is consolidating (now)||Yes|
|Stock Price is growing in past years along with EPS growth||No, North-South curves exists|
|Consolidated PE, PB Ratio, PEG Ratio||PE 15PB 5 (High)
PEG 1.6 (High)
|Cash Flow Positive, Net Profit % greater than 8%||Cash Flow: Okay
Profit %: 20%
|Paying Dividends, Tax||Yes Dividends
|EPS Growth Rate2||20% above past 2 years|
|Jump in Trailing Result EPS||Yes|
|Jump in Quarterly Result EPS||Yes|
|Expected Gain in 5 Years||300-500%|
|Price Movement Graph, 52 Week High & Low||Okay|
|Volume Analysis||15 Thousand Only|
|Power of Brand||Moderate|
|Corporate Governance, Reputation of Leaders||Okay|
Here are the positive factors regarding VST Industries based on the checklist above.
- Company is having Steady EPS Growth
- Company have Zero debts
- Celebrity Investor Radhakrishnan Damani increased it LINK
Here are the concern factors regarding VST Industries based on the checklist above.
- Book Value Ratio is very high
- Recession Period ahead could Impact Sales
Based on the above analysis I would like to say that the VST Industries possess Multibagger Stock properties and one can Invest in 2020. However one should not expect high compounded returns from this stock. It can be considered as Moderate Risk Moderate Returns investment.
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