Buy Wheels India; target of Rs 974: Firstcall Research

Firstcall Research is bullish on Wheels India and has recommended buy rating on the stock with a target of Rs 974 in its December 14, 2012 research report.

“The Wheels India was incorporated on 28th March 1961 at Tamilnadu. The main objects of the company are to manufacture wheels and rims, components and accessories thereof and to carry on the business of iron and steel foundres and foundres of non-ferrous metals. Wheels India is promoted by the TVS Group and was started in the early 60's to manufacture automobile wheels. Wheels India has grown as a leading manufacturer of steel wheels for passenger cars, utility vehicles, trucks, buses, agricultural tractors and construction equipment in India. The company supplies 2/3rd of the domestic market requirement and exports 18% of the turnover to North America, Europe, Asia Pacific and South Africa. Wheels India Limited is based in Chennai, India.”

“Wheels India Ltd is engages in the manufacture and sale of automotive components in India and internationally, reported its financial results for the quarter ended 30th Sep, 2012. The second quarter witnesses a healthy increase in overall sales as well as profitability of the company. The company’s net profit jumps to Rs.86.00 million against Rs.109.80 million in the corresponding quarter ending of previous year, an decrease of 21.68%. Revenue for the quarter decline 1.52% to Rs.4965.10 million from Rs. 5041.90 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.8.71 a share during the quarter, registering 21.68% decrease over previous year period. Profit before interest, depreciation and tax is Rs.409.00 millions as against Rs.411.80 millions in the corresponding period of the previous year.”

“At the current market price of Rs.870.00, the stock P/E ratio is at 20.06 x FY13E and 17.05 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.43.38 and Rs.51.03 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 27% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 4.24 x for FY13E and 3.78 x for FY14E. Price to Book Value of the stock is expected to be at 303 x and 2.57 x respectively for FY13E and FY14E. We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘buy’ in this particular scrip with a target price of Rs.974 for medium to long term investment,” says Firstcall Research report.

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