Greaves Cotton Multibaggers 1st-Jan-2006
sarv...@gmail.com
A power packed buy at Rs.320.
This Karan Thapar Group company is leader in Light Diesel
Engines in
the range of 15 KVA to 500 KVA catering to Power generation
,
automotive applications and agricultural application . In
automotive
application, company has market share of about 60 per cent
and this
segment is registering a growth rate of 30 % on a
year-to-year
basis. The growth in this segment has been further fuelled
by
enhanced industrial and commercial activity as well as easy
availability of finance for acquiring low cost commercial
vehicles.
The Company's financial performance for FY05 (ended 30th
June) has
been very good with sales of Rs.738 crores, EBITDA of
Rs.102 crores,
PBT of Rs.101.61 crores and PAT of Rs.62.08 crores (after
Deferred
Tax liability of Rs.30.78 crores) resulting in an EPS of
Rs.13.60.
Dividend for FY05 was 70 % and Debt equity ratio was 0.55 :
1 . As
at 30.06.05 the company had total debt of Rs.79 crores
while the
company had Rs.66.15 crores as cash & bank balances as on
that date.
Hence it can be virtually termed as debt free.
For Q2 (quarter ended 31.12.05) the sales was Rs.236 crores
(growth
of 27 % yoy ) while EBITDA was Rs.35.76 crores (growth of
31% yoy )
while PBT was Rs.30.87 crores (growth of 48% yoy).
For FY06 (ending 30th June) the company may post sales of
Rs.950
crores EBITDA of Rs.146 crores, PBT of Rs.127.50 and PAT of
Rs.78
crores giving an EPS of Rs.16.50. However, of total
estimated tax
liability of Rs.49.50 crores ,Rs.37.50 crores (equivalent
to Rs.8
per share) shall be as deferred tax liability which is not
an actual
tax outgo . Hence ,cash EPS for FY06 could be about Rs.27.
The 100% subsidiary of the the company .Greaves Leasing
Finance
Ltd.is holding 28.50 lakh shares of Crompton Greaves Ltd.
Having
market value of Rs.260 crores translating into a value of
Rs.55 per
share.
The company is almost at par with Cummins India and
Kirloskar Oil
Engines in terms of topline, profit parameters and
bottomlines.
However, share of both those companies are face value of
Rs.2 and
ruling at around Rs.200 level, while the share of this
company has a
face value of Rs.10 ruling at Rs.320.
45% shares are held by Promoters while about 34 % shares
are held by
Banks ,FI's , MF,UTI, and Insurance Companies with
remaining held by
about 44,000 shareholders.
Share is ruling at Rs.320 on a P/E of about 20 based on
FY06 earning
and at a cash P/E of about 12 for FY06. Based on expected
topline
growth of 25% and bottomline growth of 30 % for FY 07, the
corresponding P/E multiple gets reduced to that extent.
Share is available at EV to EBITDA of about 7.5 times based
on FY07
which is considered to be very cheap for an engineering
stock .
Considering the strong financials , good dividend yield,
and growth
prospects share appears to be a good buy at Rs.320 which
can give an
appreciation of about 50 % within one year.
S.P.TULSIAN
Investment Advisor.
31.01.2006.
Diaclaimer :- The writer may deemed to be concerned or
interested in
this recommendation.