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ICICI Securities Report
3M India Ltd. has declared/paid total dividend per share (including special dividend) of Rs 1,635/share over FY22-24, indicating dividend payout ratio of 141%.
We see the change in dividend policy as a structural re-rating event. Prior to FY22, the company used to hold large cash which used to impact return ratios.
We believe the change in dividend policy is EVA accretive. Other takeaways from Q4 FY24 result:
Ebitda margin scaled to 21-quarter high of 19.6%, primarily due to lower input and staff costs. We believe operating leverage and cost-saving initiatives have also aided margin expansion.
Healthcare segment reported strong growth (+18.8% YoY) after a blip in Q3 FY24.
We believe strong growth momentum in transportation and electronics, healthcare segment may anchor growth in FY25E. We believe consumer segment is showing signs of revival. The trend may accelerate further in rest of FY25E led by improving consumer demand.
We remain positive on 3M India led by established competitive advantages. Maintain Buy with a revised DCF-based target price of Rs 39,500 (implying 62 times FY26E earnings per share; earlier target price: Rs 38,400).
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