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CRISIL Research assigns fundamental grade of ‘3/5’ to Gandhimathi Appliances

16 Nov 2011 Evaluate

CRISIL Research has assigned a ‘CRISIL IER fundamental grade of '3/5' to Gandhimathi Appliances. The grade indicates that the company's fundamentals are ‘good’ relative to other listed equity securities in India. CRISIL Research has assigned a valuation grade of 4/5 to the company, indicating that the market price has an ‘upside’ from the current levels.

The assigned fundamental grade takes into account strong growth in the branded kitchen appliances industry in India driven by growing disposable income, increase in urbanization and rising number of new gas connections following a surge in the number of nuclear families. The company will be a major beneficiary of this strong growth due to its leading market position - a leader in the organized kitchen appliances industry in South India across all product categories except pressure cooker; strong brand recall - ‘Butterfly’ has a strong consumer recall in the southern markets, especially in Tamil Nadu; and well entrenched distribution network of 165 exclusive distributors. It also has tie-ups with oil marketing companies for distributing gas stoves, which enables it to penetrate the market faster. The grade is supported by an experienced management team, which has turned around the company from a sick unit to a profit making company between FY03 and FY08.

The grade is, however, impacted by intense competition from organised players such as TTK Prestige in the South; and Hawkins, Sunflame and Bajaj Electricals in the North. Additionally, the company faces competition from numerous unorganised players, who compete on lower pricing. The grade is also constrained by Gandhimathi’s high gearing at 1.7x and relatively higher working capital of 83 days in FY11.

ButterflyGandhimathi Share Price

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