Buy Clutch Auto with a target of Rs 50: Bonanza

"Clutch Auto (CAL) is a leading Clutch & Related components maker in India. It is likely to report an EPS of Rs.5 in FY2010. At CMP Rs.40, it trades at 8 PE on FY 10 estimates. On Cash EPS basis, it trades at 3.4 Cash PE on FY10 estimated Cash EPS of Rs.12/Share. Also the scrip is at steep discount to its FY 2009 Book value of Rs. 86/Share. Investors may BUY in Rs 38-40 range for a target of Rs 50 i.e. about 10 times its FY 2010 estimated EPS," says Bonanza research report.

Investment Rationale

• The replacement market is the most important segment, accounting for 47% of the sales. CAL has vast marketing pan India network of 37 marketing offices in 20 major cities.
• The Indian automobile industry is on fast revival after tough period in later half of FY09. With confidence returning in economy, CV and Capital goods sales are witnessing upward trend after almost 2 years of slow down. · Growth in Auto Industry directly benefits the Ancillary industry.
• All the major customers of CAL are witnessing strong sales growth