Angel Broking's research report on TVS SrichakraTVS Srichakra (TVSSl) reported a good set of numbers for 2QFY2016. The top-line grew by 6.5% yoy to `522cr. The EBITDA margin expanded by 539bp yoy to 15.7%, mainly due to a 997bp yoy decline in raw material cost (owing to rubber prices declining by ~6% qoq). The company has reduced the debt significantly (from `176cr to `37cr) in 1HFY2016 and as a result its interest expense has declined by 57.0% yoy to `4cr. Owing to better operational performance and lower interest outgo, the net profit nearly doubled to `49cr from `26cr in the same quarter of the previous year.We expect TVSSL’s top-line to grow at a CAGR of 11.0% over FY2015-17E to `2,338cr. We expect the operating margin to be at 15.0% in FY2017E on the back of lower rubber prices and improvement in market share in the aftermarket segment. Consequently, the net profit is expected to be at `207cr in FY2017E. At the current market price, the stock is trading at a PE of 10.4x its FY2017E earnings. We have a Buy rating on the stock with a revised target price of `3,240 based on a target PE of 12.0x for FY2017E earnings. 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.
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