Buy CEBBCO; target Rs 130: Emkay
Emkay Global Financial Services is bullish on CEBBCO and has recommended buy rating on the stock with a target price of Rs 130 in its November 5, 2012 research report.
November 09, 2012 / 13:47 IST
Emkay Global Financial Services is bullish on Commercial Engineers and Body Builders Co (CEBBCO) and has recommended buy rating on the stock with a target price of Rs 130 in its November 5, 2012 research report.
"CEBBCO Q2FY13 results were ahead of our est. given strong volumes and increasing share of the higher margin replica segment. Net revenues at Rs 1.5bn (+31% YoY/-9% QoQ) were ~9% above our est. as the company continued to fully utilize its capacities. Revenues in CV business declined 5% YoY as the company supplied more volumes in the replica segment at the cost of OEM supplies. Revenues from the railway segment were lower QoQ (on expected lines) as the company largely exhausted the Braithwaite order in Q1.EBITDA margins surprised positively at 20.3% (+760 bps YoY, +110 bps QoQ) driven by higher share of replica business which commands 30%+ margins. RM Cost as a % of sales declined 460bps YoY/160 bps QoQ while other expense too declined 160 bps YoY. Net profits at Rs 163 mn (71% YoY, -10.7% QoQ) was significantly above est. driven by strong revenue growth and better operating performance.CEBBCO’s Q2 performance underscores the increasing trend towards FBV-ing as the company reported a strong 31% YoY growth in revenues even as CV sector saw a >15% YoY decline in volumes - the company continues to run at full utilization levels. Moreover, doubling up of revenues in the replica segment highlights a new strategic direction for the company going ahead. We continue to expect a 24%+ revenue CAGR for the company going ahead.We’ve revised our volume growth estimate for the company by 12%/17% in FY13/14 and our EPS estimate by +17%/+15% to Rs 13.6/16.3. We expect capacity constraints to be the key bottleneck going ahead on which the management is already contemplating various measures. The stock currently trades at 7.2x/6.0x PER and 4.7x/3.8x EVEBITDA on our FY13/14 estimates. We maintain BUY with a target price of Rs 130, based on 5x FY14E EV/EBITDA. We still do not factor in any benefit from the TRIFAC subsidy which has an NPV of Rs 22 per share," says Emkay Global Financial Services research report.FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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