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Thejo Engineering to benefit in medium to long term: CRISIL

Thejo Engineering - Driven by vast experience in the material handling industry, established client relationships and focus on R&D, the company is well placed to benefit in the medium to long term. We retain our SME fundamental grade of 5/5, says CRISIL Research.

December 10, 2014 / 11:58 AM IST
 
 
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CRISIL Research's report on Thejo Engineering


Thejo Engineering (Thejo) reported subdued profits in FY14 and H1FY15. While the domestic business continued to perform well led by healthy traction in services, the overseas investments (for marketing and technical teams) impacted EBITDA margin as overseas sales are yet to pick up. We expect margins to be under pressure in the near term but recover FY17 onwards following expected gradual increase in sales at the overseas locations led by the company’s marketing efforts. Further, with the expected revival in the domestic economy, growth in Thejo’s key end-user industries - mining, steel and power - is expected to bounce back leading to incremental demand. Driven by vast experience in the material handling industry, established client relationships and focus on R&D, Thejo is well placed to benefit in the medium to long term. We retain our SME fundamental grade of 5/5.


We forecast consolidated revenues to grow at 22% CAGR over FY14-17 to Rs 2.7 bn – services revenues are expected to grow at 29% CAGR and product revenues at 7% CAGR. EBITDA margin is expected to decline to 5% in FY15 from 9.7% in FY14 and then recover to 11% in FY17. PAT is expected to grow at 50% CAGR over FY14-17 to Rs 115 mn.


We have lowered our earnings estimates for FY15 and FY16 by 84% and 30%, respectively, to factor in investments in marketing and sales in the overseas markets. We continue to use the discounted cash flow (DCF) method to value Thejo. We have rolled forward our model by one year to FY16 and maintain the fair value at Rs 219 per share. This fair value implies P/E multiples of 8.9x FY16E and 6.5x FY17E EPS.


Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report.  The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.

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first published: Dec 10, 2014 11:58 am

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