Centrum Research is bullish on GNA Axles has recommended buy rating on the stock with a target price of Rs 376 in its research report dated October 04, 2017.
Centrum's research report on GNA Axles
GNA Axles Ltd (GNA), established in 1993, is one of the leading manufacturers of rear axle shafts used in on-highway and off-highway vehicular segments in India. GNA’s major customer include Original Equipment Manufacturers (OEMs) like M&M, John Deere, TAFE and tier-1 suppliers to OEMs like Automotive Axles Ltd, Meritor HVS AB and Dana Ltd. GNA is well diversified with India accounting for 54% of FY17 revenue, North America (15%), Europe (21%), South America (4%) and RoW (6%). It has 2 manufacturing plants in Punjab, with capacity of manufacturing 23 lakh rear axle shafts (capacity utilization 78% for FY17), 3 lakh spindles (73%) and 4 lakh other/drive shafts (85%) per annum.
OutlookGNA is a leading player in automotive axle space having exposure both in domestic and international market with few of the large OEMs and Tier-1 clientele. It is expected to gain significantly on account of CV cycle recovery (both domestic and export markets) and bounce back in tractor sales. Currently, the stock is trading at 15.6x P/E and 6.6x EV/E on FY19E basis. We initiate coverage with a Buy rating and target price of Rs376 valuing it at 18x FY19E EPS.
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