TRF - Expected order inflows to improve visibility ; Downgrade to 'REDUCE' - TP Rs372 - PINC Research

Q3FY12 Result Review – TRF

Expected order inflows to improve visibility

TRF reported consolidated sales growth of 48% to Rs4.3bn (PINCe Rs3.4bn) led by better execution in project division (sales up by 132%). Margins at operating level were at 4.4% (after adjusting forex loss). Cost overrun in certain projects, higher material cost, unrealised foreign exchange loss and high tax rate impacted bottom line adversely. TRF reported loss of Rs8.5mn. Adjusted PAT was Rs27mn (PINCe Rs112mn). The company, in this quarter managed to bag orders worth Rs2bn. It expects orders worth Rs6.5bn in Q4FY12 in projects and product division. The automotive subsidiaries reported subdued growth of 4% on account of slowdown in the overseas market.

- Healthy order inflows expected in Q4FY12
- Subdued performance from product division

VALUATIONS AND RECOMMENDATION

The current order book of the company stands at Rs12.2bn. We have increased our sales estimates for FY12 by 8.4% and 9.2% in FY13 to factor in expected order inflows in Q4FY12 and performance of project division in the current quarter. We reduced our profit estimates by 35% for FY12 to factor in lower margins and increased it by 7.8% for FY13E. We expect TRF to witness sales CAGR of 27% (FY11-14E). The key triggers remain acceleration in order inflows and margin improvement in automotive business. Considering the steep rise witnessed in the stock price in last one month we believe there is limited upside. We maintain our target multiple at 8x and downgrade the stock to 'REDUCE' from 'BUY' and revise our target price to Rs372 (earlier Rs350).

Source : Equity Bulls

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