Buy Talbros Automotive; target of Rs 171: EIS

Consolidated net sales for the quarter grew by 11.7% to Rs 1,071.3 Mn, whereas the Standalone revenues grew by 10.8% to Rs 843.8 Mn. Gasket sales growth was at 11.7% on YoY basis and 1.5% on QoQ basis. Forging business continued to be a pain with sales down by 5.6% on YoY basis, however revival seen with 6.3% growth on sequential basis. Nippon Leakless Talbros (NLT) sales remained flat on YoY as well as QoQ basis. Magnetti Marelli Talbros Chassis System (MMT) sales grew at a substantial pace of 28.6% on YoY basis, flat on QoQ basis. Talbros Marugo Rubber (TMR) sales grew at a staggering 58.3% on YoY basis, 31.0% on QoQ basis.

The company has finally seen a turnaround with first double digit sales growth in nearly six quarters. Its core gasket business commands 38% of the gasket market in India. The company has been continuously diversifying its product portfolio by new product launches and increasing client footprint. The positive impact of new orders from various OEMs, expectation of good monsoon, expected boost in demand due to 7th pay commission and GST implication, are expected to drive strong performance in FY17 and FY18, with improving EBITDA margin. Based on these factors, we maintain our DCF based target price of Rs 171 per share (9.5x FY18E EPS). The stock offers a 49% upside from current level. Thus, we maintain our Buy rating.For all recommendations, click hereDisclaimer: 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.