Arihant Capital has given Buy recommendation for Greaves Cotton with a target price of Rs. 215 in its research report issued on Aug 16, 2022
Arihant Capital’s research report on Greaves Cotton
Greaves Cotton Limited (GCL) has reported a decent set of Numbers; Margin & PAT well above our estimates: Greaves Cotton Limited (GCL) has reported weak performance in Q4FY22 as Net profit for the quarter grew by 111.8% QoQ of INR 356.3 mn in Q1FY23 against our estimate of INR 194 mn. EBITDA for the quarter stood at INR 274 against our estimate of INR 142 Mn registered de-growth of 5.7% QoQ. The company’s EBITDA margin contraction by 34bps QoQ to 7.3% Q1FY23 is well above our estimate of 3.7%.
We have valued the standalone business to 11x its EBITDA of INR 1,268 and Ampere’s business at FY24E P/sales at 4.5x, yielding INR 136 per share. Our SOTP valuation yields a fair value of INR 215 per share. We upgrade our rating from an Accumulate to Buy rating on the stock.