Mahantesh Sabarad of Prabhudas Lilladher is of the view that Rico Auto will continue to underperform.
Sabarad told CNBC-TV18, "Rico Auto has impressive export target all right but we suspect that they won't be able to meet it soon. What's disappointing on it is that if one look at Q2 results, not much growth in topline, just 14%, infact a decline in bottomline followed by sequential as well as YoY EBITDA margin contraction. Much of their revenues come from aluminium castings and machining of that and as we all know aluminium prices have zoomed so much that Rico has been hurt."
He further added, "I have an underperformer rating on the stock, which tells that we are looking at price coming down further because we are not seen relief being offered to it in terms of their cost increases. Plus in terms of additional capacities coming up they are of course going to go where Hero Honda is and Hero Honda is going to Haridwar. That plant is going to come up sometime next June and Rico will follow soon but initially it will be a machining kind of centre out there before they put up the foundries. So it's going to be some time before those revenues will start accruing in favour of Rico. So till that point of time we believe the stock will continue to underperform."
Disclosure: Analyst doesn't hold but he recommended above stock to his clients.
