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Mar 11, 2013, 06.09 PM IST | Source: Moneycontrol.com

Hold Greaves Cotton; target Rs 81: Firstcall Research

Firstcall Research has recommended hold rating on Greaves Cotton with a target price of Rs 81 in its March 06, 2013 research report.

Firstcall Research has recommended hold rating on Greaves Cotton with a target price of Rs 81 in its March 06, 2013 research report.

"Greaves Cotton is one of the leading engineering companies in India with core competencies in diesel/petrol engines, gensets and construction equipment. Greaves Cotton Ltd reported higher revenue at Rs 5157.80 mn for the quarter ended 31st December 2012 as against Rs 4643.50 mn for the corresponding quarter last year (an increase of 11.08%). Greaves Cotton Ltd has declared a Third Interim Dividend at the rate of Rs 0.40 per Equity Share of Rs.2 each for the Financial Year 2012-13. Profit After Tax (PAT) after exceptional item of provision for diminution in value of investment in its subsidiary amounting to Rs 142.00 mn was Rs 344.00 mn as against Rs 342.00 mn, for the same period last year. During the quarter, Greaves Automotive Business entered into a Long Term Supply Agreement with Atul Auto Ltd for supply of diesel engines for 3 wheeled diesel vehicles, for a period of seven years. Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 9% over 2011 to 2014E respectively.

The company's net profit decreased to Rs.343.60 million against Rs.341.60 million in the corresponding quarter ending of previous year, an increase of 0.59%. Revenue for the quarter rose 11.08% to Rs.5157.80 million from Rs.4643.50 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.41 a share during the quarter, registering 0.59% increase over previous year period. Profit before interest, depreciation and tax is Rs.643.70 millions as against Rs.596.20 millions in the corresponding period of the previous year.

Outlook and Conclusion: At the current market price of Rs.72.00, the stock P/E ratio is at 11.71 x FY13E and 10.74 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.6.15 and Rs.6.70 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 9% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 6.67 x for FY13E and 6.12 x for FY14E. Price to Book Value of the stock is expected to be at 2.21 x and 1.83 x respectively for FY13E and FY14E. We recommend ‘HOLD' in this particular scrip with a target price of Rs 81 for Medium to Long term investment," says Firstcall Research report.

Public holding more than 90% in Indian cos

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