Buy Wabco India; target of Rs 7350: ICICI Direct

ICICI Direct's research report on Wabco India

ZF International UK i.e. the principal shareholder (promoter group) of Wabco India (WIL) proposes to sell up to 34.34 lakh shares or 18.1% stake (including green-shoe option) in WIL to comply with minimum public shareholding norms. The promoter group intend is to reduce its stake in WIL from 93.1% to 75% post offer-for-sale (OFS). It has set a floor price of Rs5,450/share in the proposed OFS with allocation in OFS on price priority basis. The minimum issue size thus stands at Rs1,872 crore. The offer will open on 25th March, 2021 for non-retail category and on 26th March, 2021 for retail category -with a minimum of 10% of the shares being reserved for retail category.

Outlook

We hold a positive view on WIL amidst the cyclical upturn in its user segments i.e. Commercial Vehicles, promoter’s intent to increase global sourcing from its Indian arm and wider product basket post the global acquisition of its erstwhile parent by ZF group. Henceforth we recommend investors to subscribe in the upcoming OFS. With forward assumptions & financials remaining unchanged, we retain our BUY rating on the stock with unchanged target price at Rs 7,350 i.e., 45x P/E on FY23E EPS of Rs 164/share.