Greaves Cotton Ltd. share price target

Amidst high scepticism, the new management of Crompton Greaves Consumer Electricals (CGCEL) reported its first quarterly show. There were no negative surprises either in terms of lower revenues or major one-off costs. Revenue growth at 12% YoY (Rs 8.1bn) was healthy.

Crompton Greaves (CG) reported yet another disappointing quarter with EBITDA losses in international subsidiaries and modest APAT of Rs 287 mn in the standalone entity. Hopes of divestment of the loss making international business receded as an offer from a potential buyer was declined. Not surprisingly, the stock fell sharply today.

Greaves Cotton (Greaves) derives 60%+ of its revenues from the auto segment (3W+4W small commercial vehicles [SCVs]). Need for last mile transportation should lead to uptick in demand for 3W goods vehicles, where engines manufactured by Greaves command a major 75%+ of the market share. The companys existing supply agreements with Tata Motors (Magic and Iris models) and its recent agreement with Eicher, strengthen our view that Auto engines business would report ~5% sales CAGR during FY2015-18E. Bajaj Auto recently announced launch of Quadricycle, for which it is awaiting regulatory clearances in the domestic market. We sense large market could open up post the successful launch of the product. Greaves is already ready with a 265cc engine to cater to the needs of OEMs who intend to compete with Bajaj in this space. Notably, some of these OEMs are already clients of Greaves for other products. However, we sense it is too early to build any expectations from the opportunity arising from the quadricycle market. In 2QFY2015, Greaves Management took a conscious decision to exit its loss making infrastructure equipments division. Losses from this segment were owing to the weak demand scenario which was leading to low capacity utilization, and...

Background: Greaves Cotton Limited (GCL) is one of India's premier engineering companies with a product based business model. The company was originally founded in 1859 and was later acquired by Thapar group in 1947. It is primarily engaged in manufacture of diesel, petrol and kerosene based engines for automobiles, farm/agri equipments, power gensets and other industrial & construction equipments. GCL is the market leader in the 3W...

Background: Greaves Cotton Limited (GCL) is one of India's premier engineering companies with a product based business model. The company was originally founded in 1859 and was later acquired by Thapar group in 1947. It is primarily engaged in manufacture of diesel, petrol and kerosene based engines for automobiles, farm/agri equipments, power gensets and other industrial & construction equipments. GCL is the market leader in the...

Karvy initiates coverage on Greaves Cotton Ltd with a Buy Rating. Greaves is expected to register a CAGR of 11% in revenue during FY15-17E and sustain market leadership with over 50% market share in the 3W automotive engines business by FY17E. EBITDA and PAT margin to improve to 14.4% and 9.6% by FY17E aided by discontinuance of infra operations during FY15. Return ratios, RoE and RoCE, to revert to above 20% by FY17E. We initiate coverage on Greaves with a BUY' rating for a target of Rs.149 implying an upside potential of 16%.

Crompton Greaves (CG) reported a forgettable quarter with adjusted loss of Rs (37)mn. More pertinently, company announced that it has received non binding offers for purchase of its power systems business in Europe, North America and Indonesia.

Background: Greaves Cotton Limited (GCL) is one of India's premier engineering companies with a product based business model. The company was originally founded in 1859 and was later acquired by Thapar group in 1947. It is primarily engaged in manufacture of diesel, petrol and kerosene based engines for automobiles, farm/agri equipments, power gensets and other industrial & construction equipments. GCL is the market leader in the...

In 3QFY15, GCL reported a modest growth of 1.7% YoY to INR 4,300mn due to subdued growth in infra and engine segments. Excluding infrastructure business, revenue has grown 6% YoY. Engine segment (96% of Sales) reported marginal growth of 5% YoY. 3W volumes grew 6% YoY to 90,000 units while 4W volumes declined 20-25% YoY to 11,000 units. Kerosene and petrol...