Buy Talbros Automotive Components; target of Rs 400: Kotak Securities

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Kotak Securities' research report on Talbros Automotive Components

TBA reported high growth in revenue and PAT in 1HFY19. In the past few months, volume growth has slowed down and is likely to keep company’s performance subdued (on a QoQ basis) in the near term. However, as demand recovers, we expect growth to pick-up for the company. Further execution of orders won by the company in different businesses is expected to drive revenue and earnings growth for the company in FY20. The company is working on BSVI related gasket requirement and is confident that per vehicle gasket requirement will see meaningful increase with BSVI compliant vehicles getting launched. Operational leverage, internal efficiencies and input cost pass through are expected to positively contribute to EBITDA margins in FY20.

Outlook

We expect healthy revenue and earnings growth for the company over FY18-FY20. At the CMP of Rs224, the stock is trading a PE of 7.8x on FY20E expected. We retain BUY on the stock with unchanged price target of Rs400.

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