SKP Securities is bullish on Commercial Engineers and Body Builders Co (CEBBCO) and has recommended buy rating on the stock with a target of Rs 128 in its January 7, 2013 research report.
“Commercial Engineers & Body Builders Company Limited (CEBBCO), promoted by Dr. Kailash Gupta and Mr. Ajay Gupta, produces vehicles and locomotive shells for diverse applications for road and railways transportation. CEBBCO is the industry leader in body manufacturing space producing bodies for most OEM’s in the country. In the railways segment, CEBBCO caters to rolling stock of the Indian Railways, refurbishes vehicles and manufactures components for coaches, locomotives and new wagons. CEBBCO also manufactures structurals for electrostatic precipitators and boilers. It has six manufacturing locations out of which four are in Jabalpur and one each in Indore and Jamshedpur.”
“The Government has provided a huge impetus for the conversion of chassis sale to FBV sale by providing for a 2% differential duty. The customer now has to pay a 12% duty on buying a FBV as against paying 14% duty on chassis purchased from the unorganized segment. This is likely to boost demand for FBV’s going ahead which will augur the topline of CEBBCO. CEBBCO has several locational advantages being close to both customers and suppliers. CEBBCO enjoys lower land, labour and overhead costs due to presence in such locations. The company is also able to reduce lead time and mitigate transportation costs. CEBBCO, with its ‘Project Replica’, is the first organized player to enter replacement market for bodies. There is a huge opportunity in this market as it is estimated that there are 4 million vehicles on road (tippers is estimated at ~600,000 units) that need replacement. Further, as CEBBCO promoters are one of the largest dealers of Tata Motors, they have the potential to capture a wider replacement market. The entire replacement market is largely unorganized with high margins.”
“We recommend a BUY rating on the stock with an 18 months target price of Rs 128/share, implying an upside of ~38% from current levels. We have arrived at the target price by taking the average of Rs 122/share at 7x FY14E EPS of Rs 17.4, Rs 122/share at 4.5x FY14E EBITDA of 169.8 crores and Rs 139/share calculated using DCF method,” says SKP Securities research report.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Read More
