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Research
Rane Brake Lining - 2QFY2016 Result Update - Angel Broking
Posted On : 2015-10-21 01:29:43( TIMEZONE : IST )
For 2QFY2016, Rane Brake Lining Ltd (RBL)'s results have come in line with our estimates. The top-line recovered, led by pick-up in the automotive segment. Given the healthy revenue growth, raw material localization initiatives, and low base of the corresponding quarter of the previous year, the net profit for the quarter more than doubled on a yoy basis.
Top-line growth recovers: After two consecutive quarters of muted top-line growth, RBL's revenues grew by a healthy 9% yoy to Rs. 109.3cr, during the quarter. The automotive OEM segment grew by a robust 16%, led by strong MHCV OEM sales. Also, the automotive replacement segment posted a decent growth of 9% during the quarter.
Localisation initiatives, operating leverage and low base lift profitability: For the quarter, RBL's net profits more than doubled on a yoy basis to Rs. 3.9cr. Raw material localization measures improved the gross margins (up 110bp yoy). Also, the operating leverage due to top-line growth further boosted profitability.
Outlook and valuation: RBL's top-line growth is likely to accelerate from 2HFY2016. Revival in the passenger vehicle OEM volumes on the back of better economic growth and lower interest rates coupled with RBL's focus on increasing the aftermarket revenues by enhancing its network and introducing new products would boost revenues. RBL's margins are also likely to improve on account of increased localization and operating leverage. We expect RBL's earnings to grow at a healthy 18% CAGR over FY2015-2017. We have retained our earnings estimates given the in-line results. We maintain our positive stance on the stock, assigning an Accumulate rating, and retain our price target of Rs. 366 (based on 13x FY2017 earnings).
Shares of RANE BRAKE LINING LTD. was last trading in BSE at Rs.320.6 as compared to the previous close of Rs. 312. The total number of shares traded during the day was 7683 in over 135 trades.
The stock hit an intraday high of Rs. 328.7 and intraday low of 316. The net turnover during the day was Rs. 2464944.
