Hold Wabco India; target of Rs 6800: ICICI Direct

ICICI Direct's research report on Wabco India

Wabco India (WIL) reported a healthy Q3FY19 performance WIL's revenue grew 7.7% YoY to Rs 700 crore. While net sales amounted to Rs 653.2 crore (up 6.1% YoY), other operating income grew 35.8% YoY to Rs 46.7 crore. We estimate that the core Air Actuation System segment and exports would each have grown ~5% YoY. Other operating income includes income from Merchandise Exports from India Scheme (MEIS) EBITDA at Rs 100.5 crore was flattish YoY with corresponding EBITDA margins at 14.4% (down 107 bps YoY) Its other income for the quarter was at Rs 9.7 crore against its recent run rate of ~Rs 25 crore Subsequently, reported PAT dipped 6.3% YoY to Rs 59.8 crore.

Outlook

We value Wabco at Rs 6800 i.e. 32x P/E (in line with the company’s long term one-year forward multiple of ~30x) on FY20E EPS of Rs 212.3/share and assign a HOLD rating to the stock. We also draw comfort from healthy cash flow generation at Wabco with present CFO yield at ~2.5% and FCF yield at ~2%.