Arihant Capital has given Accumulate recommendation for Greaves Cotton with a target price of Rs. 160 in its research report issued on May 16, 2022
Arihant Capital’s research report on Greaves Cotton
Greaves Cotton Limited (GCL) has reported weak performance in Q4FY22 as PAT, margins and revenue was below our estimates. Net profit for the quarter de-grew by 29.6% YoY while it grew by 100.5% QoQ at INR 168 mn was lower than our estimate of INR 280 mn. Standalone revenue from operations degrew by 17.1%YoY/+26%QoQ stood at INR 3,787 mn in Q4FY22 against our estimate of INR 4,950 mn led by growth in the e-mobility business and reorganization of the 2W and 3W e-mobility businesses under Greaves Electric Mobility and higher revenue contribution from the auto engines business. Gross margin of the company decreased by 121bps QoQ at 27.6%/-344bps YoY. Decreased of the gross margin on sequentially basis, the company’s EBITDA margin expanded by 196bps QoQ/-267bps to 7.7% Q4FY22 against our estimate of 9.5%.EPS at INR 0.73 in Q4FY22 against INR 0.36 in Q3FY22 and INR 1.2 in Q4FY21.In Q4FY22, retail sales of E-Mobility business stood at 62,000+ vehicles for FY22, increased by 128% from FY21 of 27,000+ vehicles. The company has also strengthened its presence across the entire value chain of last-mile mobility by launching AutoEVMart, India’s first set of multi-brand EV retail networks. The company has recommended a dividend of INR 0.2/share.
We have valued the standalone business to 11.5x its EBITDA of INR 752 and Ampere’s business at FY24E P/sales at 3.5x, yielding INR 106 per share. Our SOTP valuation yields a fair value of INR 160 per share. We maintain our Accumulate rating on the stock.