February 17, 2017 / 14:47 IST
Greaves Cotton (GCL) reported decent Q3FY17 numbers that were higher than out estimates on topline and bottomline front. However, margins were slightly lower than our estimates. Though demonetisation had a negative impact on the auto segment, the same was cushioned with strong growth in aftermarket and auxiliary power segment (power gensets).
Outlook
With strong growth in non-auto revenues and bounce back of auto segment revenues (led by price hikes of new BS IV engines), we forecast revenues will grow 14% YoY. Other positives like robust cash flow generation, cash rich balance sheet and reasonable yield will cushion against soft topline performance. We continue to rate the stock as BUY and maintain our target price of Rs 170/share.
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