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Last Updated : Jun 10, 2020 08:21 AM IST | Source: Moneycontrol.com

Hold Greaves Cotton; target of Rs 75: ICICI Direct

ICICI Direct recommended hold rating on Greaves Cotton with a target price of Rs 75 in its research report dated June 09, 2020.

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ICICI Direct's research report on Greaves Cotton

Greaves Cotton’s (GCL) standalone revenues came in at Rs 359.6 crore, down 32% YoY vs. I-direct estimate of Rs 428.2 crore, impacted by dismal engine volumes amid auto slowdown and Covid-19 lockdown. Declining topline and recurring fixed costs impacted the operating performance. EBITDA de-grew 56.3% YoY to Rs 30.6 crore (vs. I-direct estimate of Rs 51.4 crore). Further, EBITDA margins contracted 475 bps YoY to 8.5% (vs. I-direct estimate of 12%) as GCL was unable to pass through the price increase for BS-VI engines. PAT came in at Rs 10 crore, down 73.2%. Decline in PAT is largely attributable to a weak operating performance, exceptional item of Rs 5.0 crore and a decline of 61% in other income that came in at Rs 3.3 crore.


Overall auto engine volumes may remain sluggish in the medium term due to BS-VI transition and economic slowdown amid Covid-19. While new product launches in high speed E-2W vehicles (launch of Magnus high speed E-2W soon) at Ampere and new business initiatives (CNG engines, after market and B2C business) may provide much needed growth uptick in the long term. We build revenue, PAT CAGR of -4.6%, -7.4% over FY20-22E, respectively. We value GCL (base business at 12.5x on FY22E and Ampere at 1.5x P/sales on FY22E) at Rs 75/ share and maintain HOLD rating.

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First Published on Jun 10, 2020 08:21 am