The company’s Butterfly brand enjoys a strong recall and is known for better quality, long-lasting product life and low maintenance. The company has been focussing on further strengthening the brand and consistently spends around 14% of sales on advertising and promotions.
The company is expanding its distribution network across India to strengthen its presence outside the southern region. It has established 40/400 new distributor/dealer touch points in North India and plans to expand the dealer network to 2,000. In South India, it has expanded its distribution network from 5,550 to 7,500 dealers in the past few years.
The revenues will grow at a two-year CAGR of 20% to 10.5 bn in FY15 largely driven by growth in sales through in the distribution segment (non-government). EBITDA margin is expected to remain flat at 10% during FY13-15.
Using the discounted cash flow (DCF) method to value Gandhimathi and assigned a fair value of 380 per share. At this valuation, implied P/E multiples are 15.8x FY14E and 12.3x FY15E EPS
