Company Update - Goodyear India

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RAJESH DESAI

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Mar 1, 2012, 12:56:59 AM3/1/12

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Dear All,

Forwarding you the Company Update on Goodyear India.

For 4QCY2011, Goodyear India Ltd. (GIL) reported lower-than-expected top line at `395cr as against our expectation of `441cr. However, the company’s EBITDA margin remained flat on a yoy basis despite higher raw-material cost, which was offset by lower other expenses. Net profit for the quarter came in at `20cr, 8.8% lower than our estimate of `22cr. We maintain our Buy view on the stock.

Branded business and tractor tyre demand to drive future growth: GIL is a market leader in the tractor tyre industry. Tractor tyres accounted for ~60% of the company’s tonnage offtake in CY2010. The tractor industry witnessed growth of 27% in 2010 and is expected to grow at the same pace going forward, helping the company to register a ~17% CAGR in revenue over CY2011-13E. Moreover, GIL caters to high-end brands such as Audi, BMW, Land Rover, Mitsubishi and Porsche and has a brand name in the commodity business with stupendous ROIC of 1,022.7% for CY2011 in comparison to less than 30% of other listed peers. Furthermore, the company is debt free with cash reserves of `249cr for CY2011.

Outlook and valuation: We expect GIL’s revenue to post a 17.2% CAGR over CY2011-13E along with a 239bp expansion in its EBITDA margin on account of easing rubber prices, which is evident from a 29% decline from the high of `243/kg in April 2011 to `188 as on February 27, 2012. In addition, we expect the company’s net profit to witness a 37.5% CAGR over CY2011-13E to `122cr. At `358, the stock is trading at PE of 6.8x its CY2013E earnings. We maintain our Buy recommendation on the stock with a revised target price of `484, based on a target P/E of 8.0x for CY2013E earnings.

Kindly click on the following link to view the Report.

Company Update - Goodyear India

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With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6^th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com

Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.