Hold Wabco India; target of Rs 5220: ICICI Direct

ICICI Direct's research report on Wabco India

Wabco India (WIL) reported a relatively healthy Q2FY21 performance. Net sales were at Rs 419 crore, down 6% YoY (domestic down 19%, exports up 8%, aftermarket performance flattish YoY). EBITDA in Q2FY21 was at Rs 63 crore with corresponding EBITDA margins at 15.1%, up 330 bps YoY. PAT was up 3.5% YoY to Rs 35.1 crore. The management sounded confident of industry leading growth over FY21-23E amid near bottoming out of CV cycle with increase in content per vehicle under BS-6 regime as well as cost competitive nature of exports & technology support by the wider ZF group.

Outlook

We build 11%, 15.9% sales, PAT CAGR, respectively, for WIL in FY20-23E, with margins seen improving to erstwhile ~15% trajectory by that time. We value WIL at Rs 5,220 i.e. 40x P/E on FY23E EPS of ₹ 130.5/share, upgrading it from SELL to HOLD. Key risk to our call is the impending stake sale by the new promoter (~18%) to comply with minimum public shareholding norms.