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Nirmal Bang Report
IFB Industries Ltd.'s Ebitda margin was below our estimates by 184bps due to lower-than-expected growth in Home Appliances.
As per the management, due to under-estimation of Washer’s demand by IFB, it had a sold-out situation in the Washers category, and therefore growth was tepid. Oct-24 stated with a very good growth, on account of festive demand.
Efforts to expand its distribution reach, specifically for Top Load WMs, Front Load washing machines and room ACs, along with better channel extraction are expected to help IFB improve revenue from its Home Appliances division.
For RAC, the strategy is to improve profitability through cost reduction + channel extraction. Currently, FY25 target stands at ~5 lac units, with positive Ebitda.
While the Engineering Division is expected to see M&A activities, the company won’t do so until the cash run-rate of Rs 5 billion is achieved.
We remain structurally positive on IFB’s long term business prospects on account of consistent efforts to reduce costs, improve brand visibility, extend channel reach and extraction and improve the share of premium products – especially products such as front load washing machines (37% of topline in FY24). We maintain Buy with a revised target price of Rs 1,925. This implies a PE of 27 times on Sept’26E earnings per share.
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