Karvy's research report on Elgi Equipments Growth in investment activities and increased investments in key sectors like power, steel, construction, infrastructure and cement are giving an optimistic outlook for future. We believe the GFCF to GDP to improve by over 33% by FY17E, also Elgi’s current capacity utilization levels of ~70-75% leaves enough headroom to sustain the anticipated increase in demand. We expect the compressor segment to grow at 9.4% CAGR for FY15-18E. We value the company based on P/E basis. At CMP of Rs. 125, Elgi Equipments is trading at 28.8x of FY17E EPS. Historically, Elgi Equipments has been trading at 2 standard deviation of one year average forward P/E multiple of 33.5x. Furthermore, Elgi Equipments has been trading at an average P/E multiple of 38.0x for the last one year. We ascribe a multiple of 33.5x to FY17E EPS. We initiate a coverage with a “BUY” rating for a target price of Rs. 145 representing an upside potential of 16% for a 9-12 months period. For all recommendations, click here 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.
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