Godrej Industries - Diwali Pick 2012 - GEPL Capital

- Capacity expansion & introduction of new chemicals to add to revenues

- Robust volumes of animal feed and vegetable oil along with new production plants to increase margins

- Launch of new products and stake in Darling group to give revenue visibility for Godrej Consumer Products

- Spurt in booking values and addition of new projects to drive growth in revenues at Godrej Properties

- Expansion of retail food outlets in 5 new cities (Nature's Basket)

- Vegetable oil trading business to continue to add to revenues

We value Godrej Industries (GIL) at Rs.471/share, using the sum-of-the-parts (SOTP) methodology. Our target price includes a sum of Rs.256 for GPL (valued at a 40% holding company discount to the price of Rs.393) and Rs.95 for GCPL (40% holding company discount to the price of Rs.146), together accounting for ~74% of our valuation.

We value GAVL at Rs.33 (7x of FY14E earnings), the standalone chemicals business at Rs.87 (9x on FY14E earnings). Hence we initiate a buy rating with a target price of Rs.471, an upside by 53%.

Source : Equity Bulls

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