Ventura Securities has initiated coverage on Responsive Industries Ltd (RESP) with a "Buy" rating and set a price target of ?436, indicating an upside potential of nearly 45% from the current market price of ?300.
"The brokerage emphasis Responsive Industries' market presence as India's largest vinyl flooring producer and the fifth largest globally, with an extensive B2B and B2C footprint, including 2,000 retail outlets across 15 US states. This strategic positioning allows RESP to capitalize on a lucrative market poised for substantial growth."
RESP's diverse product portfolio includes vinyl flooring solutions catering to sectors such as hospitality, medical facilities, and various commercial institutions. The company is also recognized for manufacturing synthetic leather, mooring ropes, and PVC membranes, which are integral to waterproofing infrastructure projects like tunnels and roads.
The company has aggressive plans to expand its market reach, initially targeting residential markets through the B2B route and subsequently venturing into retail. This expansion strategy is expected to leverage RESP's established reputation and drive significant revenue growth.
Between FY23-27, Ventura projects RESP's revenue to grow at a CAGR of 26.2%, reaching ?2,470 crore. In terms of profitability, RESP's EBITDA and net earnings are expected to grow at a CAGR of 50.4% and 100.4%, respectively, with margins projected to improve significantly. EBITDA margins are anticipated to rise to 22.8%, while net margins are expected to increase to 15.7% by FY27. This improvement is attributed to the stabilization of PVC prices and the expanding contribution of high-margin products to RESP's portfolio.
Additionally, RESP's return ratios are projected to improve significantly, with RoE expected to rise by 1711 basis points to 19.5% and RoIC by 2829 basis points to 31.7% by FY27. The global luxury vinyl tiles (LVT) market, valued at $18.8 billion (Rs 1.57 trillion) in CY24, is expected to grow to $35.9 billion (Rs 2.99 trillion) by CY29. The US market, a key segment for RESP, is projected to nearly double to $7.2 billion (Rs 59,976 crore) by CY27, driven by a shift away from Chinese imports due to the imposition of a 25% anti-dumping duty.
However, Ventura notes potential risks to this growth trajectory, including a global economic slowdown and possible disruptions in India's infrastructure growth story. Despite these risks, Ventura remains optimistic about RESP's long-term prospects, given its strong market positioning, diverse product offerings, and strategic growth plans. The brokerage believes that RESP is at the cusp of a significant growth phase and warrants a re-rating, making it a compelling investment opportunity with substantial upside potential.
Shares of Responsive Industries Limited was last trading in BSE at Rs. 303.70 as compared to the previous close of Rs. 293.10. The total number of shares traded during the day was 16770 in over 1108 trades.
The stock hit an intraday high of Rs. 307.50 and intraday low of 293.10. The net turnover during the day was Rs. 5099256.00. |
