East India Securities is bullish on Talbros Automotive has recommended buy rating on the stock with a target price of Rs 155 in its research report dated November 17, 2016.
East India Securities' research report on Talbros Automotive
Consolidated net sales for the quarter grew by 8.9% to Rs 1,061.6 Mn, whereas the Standalone revenues grew by 4.7% to Rs 809.5 Mn. Gasket sales grew by 13.1% on YoY basis and 3.0% on QoQ basis. Forging business recorded its first positive sales growth since the last 4 quarters with a growth of 13.3% on YoY basis while on sequential basis it remained flat. Nippon Leakless Talbros (NLT) sales grew by 20% on YoY as while on QoQ basis it grew by 9.1%. Magnetti Marelli Talbros Chassis System (MMT) sales grew at a substantial pace of 42.9% on YoY basis and 11.1% on QoQ basis. Talbros Marugo Rubber (TMR) sales grew at a staggering 51.9% on YoY basis and 7.9% on QoQ basis. Revenue for H1FY17 grew by 10.3% to Rs 2,132.9 Mn.
The company has got a decent first half in the bag. It is currently in-line to meet management expectation of 10% to 12% revenue growth. The company’s pain point seems to have eased out with forging business posting a positive growth for the first time after four quarters. The recent demonetisation effort by the government is expected to hit auto sales, however this will be a short term pain. Demand revival will happen once cash circulation gets normalised. The positive impact of new orders from various OEMs, boost in demand due to 7th pay commission and GST implementation, are expected to drive strong performance in FY17 and FY18, with improving EBITDA margin. Based on these factors, we maintain our DCF based TP of Rs 171 per share (7.2x FY18E EPS). The stock offers a 33.3% upside from current level. Thus, we maintain our Buy rating.
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First Published on Nov 21, 2016 04:40 pm