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You are here : IndiaNotes >> Research & Analysis >> Companies >> Vaibhav Global Ltd. >> Research

Vaibhav Global: PE of 13.1x on FY18E earnings gives an attractive opportunity; Buy

Nirmal Bang | 27 Dec, 2016  | Follow Author | Add to my Favourites 
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First Sign of Improvement

Vaibhav Global Ltd (VGL) is undergoing various headwinds like restructuring of its back end operations, aggressive competition from a new player leading to change in VGL’s strategy and approach, since last two years. Since then, VGL has taken various steps including introduction of Budget pay (EMI), allowed return of goods, launch of mobile app. Due to intense completion VGL lost market share to its competitor and hence was posting decline in volumes for past 4 quarters however in Q2FY17, the company showed early signs of recovery and posted 5.4% volume growth in TV sales. Web sales still continue to decline. We believe the company is now at a level playing field as it has completed all its restructuring and offers same kind of services as its competitor but at a lower average selling price. VGL’s business model involves high fixed cost (cost of channel, employees, inventory etc) which makes it vulnerable in difficult times however benefits much more in improving times. The management has guided for low double digit growth in 2HFY17 (against 7.6% decline in 1HFY17) which we believe will directly translate to profitability.

Valuations and Recommendation

We continue to like the asset light business model of VGL and we believe that company has reached an inflection point. We like the proactive management. We expect the company to report muted volumes in FY17 however show improvement from FY18. Due to fixed cost heavy business model, we expect EBITDA margins to increase higher. VGL is trading at a PE of 13.1x on our FY18E earnings which we believe gives an attractive opportunity. We recommend BUY on the stock with a target price of Rs 353 (18x FY18E)


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About Nirmal Bang

Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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