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Recommendation From Consumer Electronics Sector

January 26
23:32 2018

This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon

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RISING DEMAND TO FUEL FUTURE GROWTH 

HERE IS WHY
Turnaround in financials
Rising rural demand
Innovative product launches

BSE Code: 500279
CMP: Rs50.7
FV: Rs1
BSE Volume: 277589
Date: 16/01/2018 

MIRC Electronics is in the business of manufacturing and marketing electronics goods under the brand names Onida and IGO. It serves various areas of consumer appliances such as LED televisions, air conditioners, washing machines, microwave ovens, DVD and home theatre systems, mobile phones, projector systems etc. MIRC is currently working with about 4,000 dealers across India and plans to further increase this number. 

The company’s home appliances market is growing faster than other segments, contributing 9 per cent to the revenues. The company has come up with 15 new models of washing machines and is targeting 6 per cent market share in this segment, which has only 0.5 per cent penetration in rural markets and is expected to grow at 10-12 per cent during the year. The company has also pioneered inverter ACs to grab market share of the fast-growing AC market. 

The company is looking at 60-65 per cent growth in LED TV sales in FY18, as compared to Rs308 crore sales in FY17. It has recently expanded its television product line-up with the launch of Onida KY Super Thunder. 

Recently, the company has automated its plant, which has helped the company to focus on higher margin products, which has resulted in good profitability in the last one year. The reduction in manpower is said to have saved the company Rs15-20 crore. 

The company has garnered about 15 per cent of its revenues from modern retail and has recently tied up with Flipkart and Amazon for making their products available online. 

On the financial front, the company’s revenue increased by 29.13 per cent to Rs201.09 crore in the second quarter of FY18, as against Rs155.73 crore in the same quarter last fiscal. The PBIDT of the company rose 158.54 per cent to Rs18.77 crore in the second quarter of FY18, as against Rs7.26 crore in the same quarter of the previous fiscal. The net profit of the company also increased to Rs12.04 crore, as against a loss of Rs9.92 crore during the period under consideration. 

On an annual basis, the company posted a drop in its revenue by 2.64 per cent to Rs746.37 crore in FY17, as against Rs766.62 crore in the previous fiscal. However, PBIDT of the company recorded a significant increase from a negative Rs0.74 crore in FY16 to Rs34.55 crore in FY17. The net loss of the company also declined to Rs5.68 crore in FY17, as compared to a net loss of Rs27.02 crore in FY16. 

On the valuation front, the TTM PE of the company stood at 64.71x, as against the industry PE of 44.15x. Meanwhile, its peers Dixon Technologies and Honeywell Automation posted a TTM PE of 93.16x and 76.14x, respectively. 

The stock is witnessing a turnaround in financials due to rising rural demand and innovative product launches. MIRC is targeting rural India with launch of low cost LED entry level TVs, washing machines, etc. The company is looking to grow at 20-25 per cent for the next five years. We recommend our readerinvestors to BUY the stock. 

 

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