Hold Rico Auto Industries; target of Rs 70: Sharekhan

Sharekhan's research report on Rico Auto Industries

Q4 results were significantly below estimates as increasing commodity costs, pricing power from OEM’s and operating deleverage impacted the margins. Earnings growth would be meager 2% in FY20 as slowdown in domestic OEM, pricing pressures and rising inetrest and depreciation to weigh on earnings. Return ratios are unlikely to improve and we expect ROE to remain in 10-11% range which rules out any scope of multiple re rating.

Outlook

We retain Hold rating on the stock of Rico Auto Industries (RAI) with a revised PT of Rs 70.