Buy ZF Steering Gear - Motilal Oswal

ZF Steering Gear (India) Ltd. (ZFSG.IN; Mkt Cap USD 61m, CMP Rs 306, Buy)

ZF steering results were a mixed bag with revenues in line with estimates and earnings below estimates.

A 27% revenue growth was driven by good growth in CV volumes and hence good demand for steering gears.

Operating income growth is below revenue growth due to higher raw material cost and 35% employee cost inflation.

The company has announced a 5MW solar power plant in Gujarat that should utilize some of the Rs. 90 cr cash and investment (FY10-end).

Given the below estimates earnings, we are lowering our FY11 and FY12 earnings marginally. The stock continues to be attractively valued at 4.2xFY11 and 3.6xFY12 net of Rs.100 per share cash. Cash will get converted into earnings for shareholders as the company deploys cash into machines for the new products and for the solar power venture. Reiterate BUY.

Source : Equity Bulls

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