Sharekhan expects Igarashi Motors‘ revenues and earnings to grow at a CAGR of 20% and 30% during FY2014-17 respectively. However, seen scope for 20-25% returns from the current level for the company.
Sharekhan's report on Igarashi Motors
Igarashi Motors India (Igarashi) is a leading manufacturer of micro electric motors in India and derives over 95% of its revenues from exports equally distributed among the USA, Europe and Asia. Despite a decline in the European auto industry and a slowdown in India and America, the company has managed to report strong revenue and earnings CAGR of 16% and 46% over FY2012-14 respectively.
On the back of a gradual recovery in Europe followed by an improvement in the USA and continued momentum in China the global passenger vehicle industry is expected to grow at a healthy rate. Additionally, the manufacturers’ focus on fuel efficiency and emission control to comply with the ever tightening regulations would result in an increased usage of actuator motors, which are manufactured by Igarashi. The company continues to address the auto industry’s need for smaller size, and lower weight, power consumption and cost.
Valuation—re-rating sustainable on strong financial performance: "We expect the company’s revenues and earnings to grow at a CAGR of 20% and 30% during FY2014-17 respectively. In addition, the company’s efforts to reduce its debt burden (the debt/equity ratio from 0.7x in FY2012 to 0.2x in FY2014) would further lead to better return ratios (RoCE and RoE). At the current market price the stock trades at a P/E of 10.5-11.0x FY2017E earnings. We see scope for 20-25% returns from the current level, says the report.
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