Buy WABCO India; target of Rs 1509: SPA Research

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Buy WABCO India; target of Rs 1509: SPA Research

SPA Research is bullish on WABCO India and has recommended buy rating on the stock with a target of Rs 1509 in its January 30, 2012 research report.

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SPA Research is bullish on WABCO India and has recommended buy rating on the stock with a target of Rs 1509 in its January 30, 2012 research report.

"Wabco India (WIL) has reported Net Sales of INR 2462 mn, up by 16.8% YoY & down by 3.1% QoQ. PAT at INR 376 mn, was up by 20.5% YoY & down by 11.7% on a QoQ basis. EBITDA margins at 19.4% contracted by 38 bps YoY & 88 bps QoQ, due to higher than expected employee costs. WIL posted revenue growth of 17.5% in 9MFY12 YoY, ahead of the M&HCV segment growth of 9.3% in the same period."

"WIL was able to maintain its volume growth, driven by strong demand from M&HCV sector in Q3FY12. It reported net sales of INR 2462 mn, up by 16.8% YoY & down by 3.1% QoQ. PAT at INR 376 mn was up by 20.5% YoY & down by 11.7% on a QoQ basis. Revenue in 9MFY12 stood at INR 7366 mn, up by 17.5% YoY & Net Profit at INR 1144 mn was up by 23% in the same period. EBITDA margins at 19.40% contracted by 38 bps on a YoY basis & 88 bps on a QoQ basis. This was largely due to higher than expected employee costs, which were up by 109 bps YoY & 13 bps QoQ. Raw material costs de-grew by 190 bps YoY and were up by 51 bps QoQ. Other operating expenses were also up by 118 bps YoY & 141 bps QoQ. WIL reported EBITDA margins of 19.37% in 9MFY12, down by 73 bps vis-à-vis 9MFY11.We expect WIL to report EBITDA margins of 19.58% in FY12E & 19.75% in FY13E."

"WIL has embarked on phase 2 expansion of its 100% EOU, located at Mahindra World City, which is likely to be completed by end of FY12. WIL exclusively uses this unit to cater to the needs of WABCO plants globally. WIL is also looking for establishing a new assembly plant in Lucknow to serve customers in North India. It has already purchased land and expects this capacity to come in by FY13E. We expect M&HCV sector to register a CAGR of 10-12% over FY11- 13E, resulting in sustained growth for WIL. We expect growth in Q4FY12 to be better than the last quarter as sales in March has been traditionally strong for the M&HCV segment. We expect WIL's revenue & profit to register a CAGR of 24% & 25% respectively over the next two years. We retain our "BUY" recommendation with a target price of INR 1509 in 15 months at 10xFY13E EV/ EBITDA," says SPA Research report.

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