Buy Innoventive Ind; target of Rs 157: Aditya Birla Money

Aditya Birla Money is bullish on Innoventive Industries and has recommended buy rating on the stock with a target of Rs 157 in its August 17, 2012 research report.

“Innoventive Industries’ (IIL) Q1FY13 results were below our expectations on account of slowdown in the motor vehicles parts business and lower-than-expected volumes in the tubes business.  IIL’s standalone revenue declined 1% to Rs1.35bn on account of slowdown in the motor vehicles parts business, which de-grew 12.0% YoY to Rs 357.9mn. IIL’s standalone EBITDA for the quarter grew 6.6% YoY to Rs 368.7mn. EBITDA margins grew 192bps YoY and 45bps QoQ to 27.2% on account of higher-than-expected realisations due to rupee depreciation and higher proportion of sales of value-added products in the tubes business. Standalone PAT declined 10.4% YoY to Rs 121.5mn on account of higher depreciation.”

“During the quarter, sales volume of CEW tubes and membrane strips grew 33.7% YoY and 21.3% YoY to 6,196 tonnes and 2,766 tonnes respectively. Sales volume of the low-margin ERW tubes declined 25.7% YoY to 5,154 tonnes as there was higher captive consumption for increased production of the high-margin CEW tubes. During Q1FY13, IIL’s exports as a % of total sales increased to 26% as compared to 20% in Q1FY12. With the 2.7x capacity expansion of its CEW tubes facility, IIL plans to increase its exports to 40-50% by FY14E.”

“Though IIL’s cost competitiveness and ability to do high product customisation through product and process engineering makes it well placed to drive exports, the weak global economy might lead to lower-than-expected growth in export volumes in CEW tubes for IIL. We reduce our volume assumptions for CEW tubes for FY13E. Also, the motor vehicle (MV) parts business is slowing down on account of slower growth in two-wheelers and three wheelers. We lower our revenue and EBITDA assumptions for the MV parts business. For FY13E and FY14E, we reduce the revenues of the MV parts by 9.1% and 13.2% to Rs 1.74bn and Rs1.83bn respectively, while reduce the EBITDA of the same by 18.4% and 21.2% to Rs 347mn and Rs 372mn respectively. Consequently, we lower our EPS estimates for FY13E and FY14E by 9.8% and 13.2% to Rs 15.4 and Rs 19.1 respectively,” says Aditya Birla Money research report.

FIIs holding more than 30% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More