Buy Clutch Auto; target of Rs 200: IL&FS Investsmart

IL&FS Investsmart report on Clutch Auto:

Results better than expectations

Clutch Auto (CAL) surprised us with its topline growth of 84.3%, driven by strong domestic sales, which grew by 115% YoY. The company’s EBITDA, in absolute terms grew 85% YoY. While, EBITDA margin also improved 100 basis points to 15.4% YoY. Growth in margin reflects improvement in operational efficiencies, improved product mix and inventory management. CAL’s net profit was up 41% YoY at Rs 70.8 million.

We expect CAL to report 35% CAGR in earnings between FY07- FY09E; with EPS increasing from Rs 13.9 in FY07 to Rs 25 in FY09E. At a PER of 7.4x FY08E and 5.1x FY09, the stock looks attractive. Hence, we are maintaining ‘Buy’ on the stock with a price target of Rs 200 (an upside of 56%) on a PER of 11.4x FY08 earnings.