Buy Wabco India; target of Rs 7350: ICICI Direct

ICICI Direct's research report on Wabco India

Wabco India (WIL) reported a strong Q3FY21 performance. Net sales were at Rs 566 crore, up ~29% YoY on the back of a healthy pick-up in CV performance across domestic and export markets. Margins improved 40 bps QoQ to 15.5%, with the performance being impressive as it encompassed ~450 bps QoQ decline in employee & other expenses as percentage of sales i.e. operating leverage benefits, with gross margins contracting ~420 bps QoQ. Consequent PAT was higher by 35% YoY to Rs 52 crore.

Outlook

We value WIL at Rs 7,350 i.e. 45x P/E on FY23E EPS of Rs 164/share, upgrading it from HOLD to BUY (earlier TP: Rs 5,220).