Greaves Cotton has target of Rs 120: Parmar

Greaves Cotton has target of Rs 120, says Ajay Parmar, Head-Institutional Research, Emkay Global Financial Services Ltd.

Parmar told CNBC-TV18, "Greaves Cotton is basically two divisions; one is the engine division which is doing extremely well with 20% margin. In that they have three segments auto, industry and agri. Auto is doing extremely well, they have currently signed a 10 year contract with Tata Motors and also planning to get into contract with ACE Magic. With Mahindra and Mahindra they have got very good relations, they just signed a 5 year contract for single cylinder engine for their three wheeler vehicles."
He further added, "Apart from that they have an infrastructure division which is 25% of the total revenue and has just got breakeven from Q2 onwards. One thing that I like about the company is it is into cash generating business, its ROE of 32%. Basically, it is a debt free company and available at just 12 times."
"In fact the auto segment is doing very well and infrastructure segment during the last year has improved a lot, we expect this to again improve much better. So I think at this level for a company with 32% ROE, debt free and cash generating business, I think 12 times looks quite attractive at these level. I am expecting a target price of almost Rs 120 from current levels. I am expecting almost 30-35% rise in share price."