Buy Talbros Automotive; target of Rs 171: EIS

Consolidated net sales for the quarter grew by 5.8% to Rs 1,032.6mn, whereas the Standalone revenues grew by 6% to Rs 819.2mn. For FY16, consolidated net sales grew by 0.8% to Rs 3,920mn, whereas the Standalone revenues de-grew by 0.2% to Rs 3,100.9mn. The forging business continued to remain in pain due to lower exports and adverse currency movement (of EURO) leading to lower realizations at the top-line, as 47% of revenue comes from exports in this segment.     

TACL witnessed a subdued FY16 due to subdued economy and adverse currency movement.  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 lower commodity prices is expected to continue in FY17, thus improving EBITDA margin as business starts getting more traction with good monsoon. Incorporating subdued FY16 performance, we have cut down our future projections, and our DCF based target price now stands at around Rs 171 per share (9.5xFY18E EPS). The stock now offers 67% upside from current level. Thus, we maintain our Buy rating. For all recommendations, click here Disclaimer: 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.