INSUBCONTINENT EXCLUSIVE:
ICICI Direct has given a buy recommendation on Timken India (TIL) with a target price of Rs 830.
Shares of Timken India traded at Rs 686.05
around 3 pm on 6 June, 2019
The brokerage has set a one-year horizon for the stock to hit the target price.
As per the brokerage, TIL reported a stellar Q4FY19
performance on the back of over 2 times growth in railways segment
Exports segment grew at strong double digits for the quarter
Accordingly, revenues came in at Rs 448 crore, up 16.4 per cent quarter-on-quarter (QoQ)
Gross margins came in at 46.1 per cent against 45.6 per cent QoQ due to better product mix
Absolute Ebitda grew 82.2 per cent QoQ to Rs 101.2 crore
Other income also jumped 2 times QoQ and PAT increased 116.5 per cent QoQ to Rs 57.2 crore.
"To fully utilise ABC capacities, TIL is
planning a capex of Rs 35-40 at its Bharuch facility (current utilisation at ABC at nearly 70 per cent)
As per the brokerage, access to new markets and geographies along with operational synergies from the merged entity is likely to be key
The brokerage expects both domestic and exports segments to grow at a CAGR of 11 per cent, 15.5 per cent, in FY19-21E, respectively
Besides, it expects revenue to grow at 12.1 per cent, Ebitda to grow at 14.5 per cent and PAT to rise at 18.5 per cent in FY19-21E
"We expect strong Ebitda growth as we estimated higher utilisation in FY20-21E
We value the company at 30 times FY21E EPS to arrive at a target price of Rs 830," said the brokerage.