Buy Schaeffler India; target of Rs 5000: JM Financial

JM Financial's research report on Schaeffler India

Schaeffler Group announced merger of its unlisted subsidiaries i.e. INA Bearings (INA) and Luk India (LuK) into the listed subsidiary Schaeffler India (SCHFL), to form a single India wide entity.  The consideration will be paid through share swap, resulting in an increase in parent  company’s holding to 74.1% (vs 51.3 %).The transaction value  is pegged  at INR 62bn, valu ing the combined entity at  PE of  48x CY16 (32% premium to  SCHFL ) and EVE of 23x  CY16 (8% premium to SCHFL ).

Outlook

We continue to maintain BUY rating with TP of INR 5,000 as we forecast 11% /19% sales/net  profit CAGR over CY16 - 18E.