Mid-cap Stock: Responsive Industries expects strong growth due to India’s infrastructure plans; Ventura sees 48% upside

Responsive Industries announced that it anticipated substantial growth following a major government infrastructure initiative. Moreover, brokerage house Ventura Securities has initiated coverage with a buy call on the mid-cap stock with a target price of ₹436, implying an upside potential of 48 per cent in the next two years.

Exchange Filing

Responsive Industries Ltd., a leading supplier of PVC membranes and synthetic products, highlighted its potential for business expansion as the Ministry of Road Transport & Highways (MoRTH) announced plans to develop 75 tunnel projects across the country. The government has committed ₹1 lakh crore to these projects, aimed at improving national infrastructure and connectivity.

As per the filing, the company is well-positioned to supply PVC membranes for these tunnel constructions, which are essential for structural integrity and longevity. Responsive Industries, already involved in high-profile infrastructure projects like the Rishikesh-Karanprayag rail link and the Rangpo Tunnel in Sikkim, expects this initiative to drive significant demand for its products. A company spokesperson expressed enthusiasm about the opportunity, noting that the government’s focus on infrastructure aligns with Responsive Industries' long-term growth strategy.

With the surge in infrastructure development, Responsive Industries is preparing to meet immediate supply needs and aims to establish long-term partnerships for future projects. The company reiterated its commitment to delivering top-quality products and supporting the nation’s growth through its expertise in PVC membrane technology.

Stock Price Trend

The stock has fallen 11 per cent in the last one year and over 3 per cent in 2024 YTD. Just in September so far, it has risen over 11 per cent after two straight months of decline. It shed over 7 per cent in August and 11 per cent in July.

The mid-cap stock hit its 52-week high of ₹364.80 in September last year. Currently trading at ₹294.40, it is over 19 per cent away from a year-high. Meanwhile, it has advanced over 15 per cent from its 52-week low of ₹255.25, recorded in June this year.

Ventura Securities on Responsive Industries

The brokerage noted that Responsive Industries Ltd (RESP), India’s largest vinyl flooring producer and the fifth largest globally, had a strong B2B and B2C presence with 2,000 retail outlets in 15 US states. With the Indian government’s anti-dumping duty on vinyl tile imports since April 2023, the domestic market, valued at $11.4 billion in CY23, offered RESP significant growth potential.

RESP, already supplying vinyl flooring to hospitality, medical, and commercial sectors, planned to enter the residential market via B2B, with future retail expansion. The brokerage rated RESP a "BUY" with a ₹436 target price, implying a 45.3 per cent upside, citing the company’s long-term growth outlook, supported by expanding high-margin products.

Ventura expects RESP’s revenue to grow at a 26.2 per cent CAGR to ₹2,470 crore by FY27, with EBITDA and net earnings projected to grow at 50.4 per cent and 100.4 per cent CAGRs. Margins had stabilized post-PVC price disruptions, expected to improve to 22.8 per cent (EBITDA) and 15.7 per cent (net) by FY27. With current capacity utilization at 50-55 per cent and ₹350 crore capex planned, cumulative free cash flow (FCF) over FY23-27 was estimated at ₹729 crore, allowing RESP to stay debt-free. It forecasts RoE and RoIC to rise to 19.5 per cent and 31.7 per cent by FY27.

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