July 13 (Reuters) - Genuity Capital Markets initiated Canadian bus maker New Flyer Industries Inc (NFI_u.TO: Quote, Profile, Research) with a "buy" rating and a price target of C$11.50, citing good distribution yield and potential for attractive unit price appreciation.

Analyst David Tyerman said it believes New Flyer's C$1.17 cash distribution per unit is very solid and it will not be affected by the upcoming taxation of income trust distributions, as the units are income deposit securities and therefore not subject to income trust rules.

Tyerman also projects NFI's unit price should move up to the C$11.50 range in the next year (17.3 percent increase), driven by stronger margins and an increased valuation multiple, partially offset by negative foreign exchange movement

"We expect NFI margins to normalize as mix improves and a large loss-making contract rolls off," Tyerman wrote in a note to clients.

The analyst said due to strong recent order activity and high win rates, the company has three and a half year backlog with substantial additional opportunities ahead.

Units of New Flyer Industries closed at C$9.80 Friday on the Toronto Stock Exchange. (Reporting by R. Manikandan in Bangalore; Editing by Anil D'Silva)