This multibagger stock could rally further as ICICI Securities has 'Buy' tag
Premium- The brokerage firm has Buy recommendation on the multibagger stock that is up over 143% in a year's period
Butterfly Gandhimathi Appliances (BGAL) has approved sale of 55% stake held by promoter for a consideration of ₹1,410 crore to Crompton Greaves Consumer (CGCEL). The deal values the company at ₹2,526 crore. Shares of Butterfly Gandhimathi have surged about 7% in the last five trading sessions as compared to about 3% fall in benchmark BSE Sensex.
Crompton Greaves will also have to launch mandatory open offer to the public shareholders of Butterfly, for acquiring up to 26% stake in Butterfly at a price of ₹1,433.9 per equity share, aggregating up to ₹667 crore. The total acquisition cost (including open offer) would be up to ₹2,077 crore. Further, Crompton will also acquire trademark rights for a consideration of ₹30.4 crore
Over the last three years, the multibagger stock has appreciated at a CAGR of 75%. Domestic brokerage house ICICI Securities has Buy rating on Butterfly Gandhimathi shares with a target price of ₹1,620 and target period of about twelve months.
The acquisition would enable BGAL to access CGCEL’s dealer network in new geographies (mostly north India), which will enable it to penetrate these markets faster and accelerate its revenue growth. BGAL’s appliances business is likely to benefit from CGCEL’s pan-India presence in electrical goods stores, which could act as key triggers for future price performance, as per the brokerage.
“BGAL has shown consistent improvement in financial performance parameters with working capital days, return ratios getting significantly enhanced in FY21. We expect it to maintain RoCE of ~30%+ in FY24E. We model revenue, earnings CAGR of 18%, 40%, respectively, in FY21-24E," the note added.
Butterfly Gandhimathi is one of the leading manufacturers of kitchen & electrical appliances in India and sells its products branded as ‘Butterfly’. The company is a market leader in India for SS LPG stoves & table top wet grinders and major supplier of mixer grinders & pressure cookers.
Over the last three years, BGAL has enhanced its focus on modern trade/online distribution channels to capture higher revenue growth, the brokerage highlighted.
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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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