Greaves Cotton - Result Update - ICICI Securities

Greaves Cotton's (GCL) standalone revenues came in at Rs. 359.6 crore, down 32% YoY vs. I-direct estimate of Rs. 428.2 crore, impacted by dismal engine volumes amid auto slowdown and Covid-19 lockdown. Declining topline and recurring fixed costs impacted the operating performance. EBITDA de-grew 56.3% YoY to Rs. 30.6 crore (vs. I-direct estimate of Rs. 51.4 crore). Further, EBITDA margins contracted 475 bps YoY to 8.5% (vs. I-direct estimate of 12%) as GCL was unable to pass through the price increase for BS-VI engines. PAT came in at Rs. 10 crore, down 73.2%. Decline in PAT is largely attributable to a weak operating performance, exceptional item of Rs. 5.0 crore and a decline of 61% in other income that came in at Rs. 3.3 crore.

Valuation & Outlook

Overall auto engine volumes may remain sluggish in the medium term due to BS-VI transition and economic slowdown amid Covid-19. While new product launches in high speed E-2W vehicles (launch of Magnus high speed E-2W soon) at Ampere and new business initiatives (CNG engines, after market and B2C business) may provide much needed growth uptick in the long term. We build revenue, PAT CAGR of -4.6%, -7.4% over FY20-22E, respectively. We value GCL (base business at 12.5x on FY22E and Ampere at 1.5x P/sales on FY22E) at Rs. 75/ share and maintain HOLD rating.

For details, click on the link below https://www.icicidirect.com/mailimages/IDirect_GreavesCotton_Q4FY20.pdf

Shares of GREAVES COTTON LTD. was last trading in BSE at Rs.79.35 as compared to the previous close of Rs. 82.25. The total number of shares traded during the day was 97095 in over 1681 trades.

The stock hit an intraday high of Rs. 83.35 and intraday low of 78. The net turnover during the day was Rs. 7775804.

Source : Equity Bulls

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