Buy Goodyear India; target of Rs 383: Angel Broking
Brokerage house Angel Broking is bullish on Goodyear India and has recommended 'buy' rating on the stock with a target price of Rs 383 in its research report of dated November 06, 2013.
November 09, 2013 / 15:23 IST
Angel Broking's report on Goodyear India
"For 3QCY2013, Goodyear India (Goodyear) reported a top-line of Rs 407cr, in line with our expectations, and 10.1 percent higher on a yoy basis from Rs 369cr in 3QCY2012. The EBITDA came in at Rs 31cr as against our expectation of Rs 35cr and vs Rs 24cr in the same quarter previous year. The EBITDA margin for the quarter expanded by 108bp yoy to 7.6 percent. The expansion in margin was mainly led by decline in raw material cost as a percentage of net sales. Consequently, net profit grew by 33 percent yoy to Rs 20cr in 3QCY2013.""Goodyear is a market leader in the tractor tyre industry. Tractor tyres accounted for ~60 percent of the company’s tonnage off-take in CY2012. During 9MCY2013 domestic tractor sales volume grew by ~14 percent yoy due to good monsoon. As per industry reports, tractor sales are likely to grow in the range of 10-12 percent in CY2013. Thus, we expect Goodyear to register a 7.9 percent CAGR in revenue over CY2012-14."Outlook and valuation: "On the back of strong growth in tractor tyre market in 9MCY2013 and decline in rubber prices, earnings are expected to grow at a CAGR of ~29.9 percent over CY2012-14 to Rs 95cr in CY2014. Moreover, Goodyear has cash reserves of Rs 289cr as of June 2013, which is ~38 percent of its total market capitalization. At the current levels, the stock is trading at a PE of 8.0x its CY2014E earnings and P/BV of 1.5x for CY2014E. We recommend a Buy rating on the stock with a target price of Rs 383 based on a target PE of 9x for CY2014E (includes 50 percent cash)," says Angel Broking research report.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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